Today is the first day of open enrollment for the individual marketplace. Additionally, it is open enrollment for a lot of employer-sponsored plans as well as Medicare. This past weekend I taught the basics of healthcare 101 in my ChooseFI North East Ohio. Health insurance seems to be a timely topic.
The ways we can obtain health insurance
There are really 6 ways we can be insured:
- Employer-sponsored plans
- Individual plans via the Affordable Care Act (ACA)
- Ministry health shares – ACA compliant but not real insurance
- Medicare due to disability
- Medicare due to age (65)
I’m most qualified to talk about employer-sponsored plans since that is what I deal with for a living; however, I will touch on some other basics.
Open enrollment is a specified time each year where you can make plan elections and changes to your coverage. Otherwise, you need to have a qualifying event (marriage, divorce, the birth of a child, adoption of a child, and involuntary loss of coverage). You have 31 days from the qualifying event to obtain coverage.
The following health plans have an annual open enrollment period:
- Employer-sponsored plans – check with your Human Resource department on when your group plan’s open enrollment period fall. Many group plans renew January 1st but not all so it’s important you find out about yours.
- Individual plans via the Affordable Care Act (ACA) – if you are enrolled on an individual plan via healthcare.gov your open enrollment for 2019 is Thursday, November 1, 2018, through December 15, 2018, for a January 1st, 2019 effective date.
- Medicare – Open enrollment for 2019 is October 15, 2018, through December 7, 2018.
Choosing Your Coverage
During open enrollment with your employer-sponsored plan, you may have a choice between several plans. Additionally, if you have individual coverage you have a choice in plans. My hope is to equip you to know more about the basics so you can make an educated decision.
Things to pay attention to:
- Deductible (single/family)
- Embedded or aggregate?
- HSA qualified plan versus traditional plan
- Maximum out of pockets
- Office visits
- Emergency rooms
- Urgent care
Deductibles run calendar year and re-set every January 1st. There are exceptions on employer-sponsored plans with deductibles running plan year so check with your HR department.
An embedded deductible protects individual members inside of a family
- Your plan has a $1,350 single/ $2,700 family deductible.
- If one member inside of the family meets the single deductible ($1,350), they are done with their deductible.
- At least two members of the family must make up the family deductible ($2,700) before the entire family is covered.
An aggregate deductible means that the entire family deductible must be met before the entire family is covered.
- Your plan has a $1,350 single/ $2,700 family deductible.
- If one member meets the single deductible ($1,350), they are NOT done until the entire family ($2,700) deductible has been satisfied.
Is your plan traditional or HSA qualified?
On Traditional plans, deductibles must be met first for major medical episodes of care only:
- Outpatient surgeries and/or procedures
Copay episodes of care are not subject to the deductible (on traditional plans).
On this example, if you have a major medical episode of care you will first need to pay your deductible. After your deductible has been met, you’ll pay your coinsurance (20%) until you hit your maximum out of pocket. Copays do count towards the maximum out of pocket and as I stated above are not subject to the deductible.
On HSA qualified plans, deductibles must be met for all episodes of care.
As you can see in this example every episode of care is subject to the deductible. The only exception is preventative care. Once your deductible has been met, you pay your coinsurance (0% in this example) until you hit your maximum out of pocket. The big advantage about HSA plans is that you can contribute pre-tax dollars to an HSA account. More on that later.
Coinsurance & Maximum out of Pockets
- Coinsurance is paid after deductibles are met.
- Coinsurance continues until the maximum out of pocket is met.
- After the maximum out of pocket is paid, the insurance company pays 100%.
- Per Healthcare Reform all preventative visits are covered 100% and are not subject to the deductible or a copay.
- Physical examinations
- A lot of the tests that are recommended at age-appropriate times (think mammograms & colonoscopies).
- Child immunizations
- Flu Shots
- Pneumonia shots (after a certain age)
Buyer beware: if you are diagnosed at the preventative visit or inquire about a condition it will no longer be preventative and coded as diagnostic.
Premium is the amount you pay for your health insurance each month. If you are on an employer-sponsored plan, your employer is paying for a portion of that. This is why COBRA rates are so much higher. COBRA rates are the full premium without the employer’s share.
Many employers do a cost-share percentage (i.e. 90%/10%, 50%/50%). Furthermore, some employers pay a higher percentage for single coverage and a lesser percentage for dependent coverage. Some employers simply pay a flat dollar amount.
It is typical today that many employers have a mandatory spousal waiver. A spousal wavier means if your spouse has access to their own coverage, whether it be through employment, Medicaid or Medicare, they must waive off the plan.
Traditional plans are typically quite a bit higher in premium than HSA qualified plans. You pay a higher premium for the convenience of copays.
If you are financially able to plan for the maximum exposure of an HSA plan, you may want to consider the lower premium cost HSA option.
Bottom line: find out the specifics of the premiums associated with your employer-sponsored plan(s).
I wrote a post on the magic of HSA accounts as an investment vehicle. I recommend checking it out if you are interested in investing your HSA dollars.
Basically being on an HSA qualified plan allows you to contribute pre-tax dollars to a Health Savings Account (HSA). Furthermore, you can draw the monies for qualified medical, dental, and vision expenses without paying taxes.
Each year the IRS sets limits on:
- The minimum deductibles for plans to be an HSA qualified
- Maximum out of pockets on said HSA qualified plans
- Contribution limits for singles & families
I am a big fan of being a wise consumer of everything and that includes healthcare. Interestingly healthcare costs are not very transparent and providers are often removed from the cost.
However, many insurance carriers have cost estimators online that we, as the insurer, can utilize. Major insurance companies allow you to create an online user portal where you can estimate your costs, amongst other things.
In a nutshell, costs can vary wildly from one hospital system to the next. Furthermore, you can save a lot of money if you get major tests & lab work done at stand-alone labs or imaging centers rather than at a hospital.
If you want more detailed information on consumerism, I recommend you check my post on lowering your healthcare cost at ChooseFI.
Again the open enrollment period for 2019 for the individual marketplace is November 1, 2018, through December 15, 2018. You’ll have the same plan considerations as I mentioned above.
The exchanges use metals to differentiate between levels of plans:
It’s pretty intuitive. The higher the grade of the metal, the richer the plan. The richer the plan, the higher the premium.
My biggest advice on individual plans is to PAY ATTENTION TO THE NETWORK. Here in Ohio, the individual plans come with very narrow networks. It is a different state to state but be sure you choose a plan with a network that is right for you and your family.
The million-dollar question is, am I eligible for a subsidy? The first thing you’ll need to calculate is your Modified Adjusted Gross Income (MAGI). Calculate this for the year in which you are applying for coverage. I recommend checking out this definition on healthcare.gov. Additionally, Two Corporate Millennials have a great article on tax optimization with a simple example of calculating your MAGI.
If your MAGI falls between 100% and 138% of the federal poverty guidelines, you could be Medicaid eligible.
If your MAGI falls between 138% and 400% of the federal poverty guidelines, you’ll likely qualify for a subsidy.
Be careful to consider changes to your income in the year you obtain your subsidy. There is always a day of reckoning when it comes to tax time.
Open enrollment for Medicare is October 15, 2018, through December 7, 2018. Medicare deserves a post of its own so I will just give a broad brush of the basics here.
Once you turn 65 you are automatically enrolled in part A which is hospitalization. You have the option to enroll in part B or defer it (if you are choosing to continue to be covered by an employer-sponsored plan). Part B covers doctor visits.
You’ll likely need to purchase either an advantage plan (my pick if the HMO works for you) or supplemental plans to include things like prescription drug coverage.
Every year during open enrollment, Medicare members are inundated with a plethora of information. Additionally, when you are turning 65 you’ll be bombarded. I recommend finding a Medicare consultant who is a teacher at heart and can guide you through the process.
My hope is that the stuff is a little more approachable and understandable for you.
As all things, take the time to understand the implications of your choices and ask for help if you need it.
If you want to access my PowerPoint from my teaching you can view it here. It goes into more detail on consumerism, HSA, and subsidies.
Happy open enrollment!