Sarah Sherman works with Truepoint employees, advising them on healthcare decisions, while Nate Johnson assists clients in assessing healthcare options and choosing the best one for their financial plan. In this Viewpoint, they collaborate to provide an integrated view of how to assess your healthcare choices.
In today’s world, the term “health insurance” conjures up a number of emotions – from relieved to confused to downright frustrated. As a result, we often receive questions from clients on this topic. The common driver behind the questions is a desire to feel informed and prepared in an ever-changing, and costly, landscape. Gaining greater comfort begins with knowing when to review your coverage and what to consider.
As a general rule of thumb, you should review and evaluate your current benefit elections against the options available to you on an annual basis. A good time for this annual review is in the weeks leading up to your plan’s open enrollment. Open enrollment is an annual event and the dates vary by plan type.
In addition to the open enrollment window, most plans offer special enrollment periods in a few limited cases. A special enrollment period is triggered by a qualifying “life event” and generally allows an individual 30-60 days following the event to enroll, drop, or change benefit elections. This is a natural time to evaluate your coverage in light of life changes.
- If you are a newlywed, you may now have two plans to choose from and should compare those plans. You should also compare those plans to individual plans and those in the Health Care Marketplace. Keep in mind, if you opt for a plan outside your employer, you lose the pre-tax premium benefit that you were likely receiving. Also some employer plans may apply a surcharge to the spouse premium if he/she is eligible for coverage through their own employer.
- If you recently retired or resigned, but are not yet eligible for Medicare, you can consider COBRA (if applicable), an individual plan and a Health Care Marketplace plan.
- If you recently lost coverage due to a divorce or the death of your spouse, you should consider COBRA (if applicable), your employer’s plan (if applicable), an individual plan and a Health Care Marketplace plan.
What to Review
Regardless if you are presented with an open enrollment period or special enrollment period, you should consider the following when reviewing your current coverage and comparing it to other plans.
- The network of healthcare providers: Are your preferred providers covered “in-network”? If not, most plans charge higher co-pays and deductibles for out-of-network providers.
- Deductibles/maximum out of pocket amounts
- Premiums: Will your employer contribute? Do you qualify for a subsidy through the Health Care Marketplace?
- Co-pays and co-insurance amounts: What percentage of your costs for care will be borne by the insurance company versus you (100/0, 80/20, 50/50, etc.)
- Preventive care coverage
- Prescription coverage
- Ancillary coverages: Dental? Vision?
- Health Savings Account (HSA): Available with High Deductible Health Plans (HDHP) only
- Should I choose a High Deductible Health Plan (HDHP) or a Co-pay plan?
The general trade-off between HDHPs and Co-pay plans is the monthly fixed premium and the out-of-pocket costs (cost of claims paid by the covered individual). Once benefits and networks have been reviewed, the best way to approach this decision is in the context of one’s anticipated healthcare needs and spending. The HDHP offers lower premiums and the tax advantaged savings opportunity of the Health Savings Account (HSA), but also typically shifts more of the claims cost to the insured. HDHP plans can be very attractive to healthy individuals, but also may be attractive to individuals with chronic healthcare needs depending on the maximum out-of-pocket limit.
- When does a Health Savings Account (HSA) come into play?
One of the most unique benefits of a HDHP is the ability to open a tax advantaged account for medical expenses. Because the money you place in an HSA does not have an expiration date, those with sufficient cash flow to cover healthcare spending can employ a strategy that uses this account as a tax-free investment vehicle to fund future medical expenses in retirement. The money is contributed pre-tax, grows tax free and can be withdrawn tax free for medical expenses (triple tax advantage!). For example, an annual maximum contribution of $3,350 for an individual in the 25% marginal tax rate would be $837 in up front tax savings. For a more detailed discussion of HSA accounts see our prior Viewpoint.
- Should I consider COBRA if I retire, resign, lose my job or lose my spouse’s coverage?
COBRA is the continuation of a former employer’s group coverage intended to provide a bridge until new coverage can be established. Historically it was used when a participant didn’t qualify for individual coverage (often due to pre-existing conditions), but that problem is less prevalent with the advent of the Marketplace. Before opting for COBRA coverage, an individual should shop around and compare benefit coverage and costs of the COBRA plan with individual plans offered by various carriers as well as plans available in the Marketplace.
As this discussion demonstrates, some extensive number crunching may be required to determine your best health insurance option – and Truepoint is here to help you work through it. Even after a careful estimation of your healthcare needs, plan options and a thorough review of your financial situation, it is important to remember that all of these considerations can change significantly over time. So to ensure you are well positioned for life’s changing circumstances, be sure to make this health insurance review an annual exercise.