For the past month, we’ve been writing and posting about different aspects of employee benefits packages and how your choices regarding your benefits play an important role in your overall financial circumstances. One of the reasons we’ve been writing about employee benefits this month is that the open enrollment period is quickly approaching for most employees.
Open enrollment is a period of about two to four weeks that happens every year, usually in the fall. During open enrollment, employees of U.S. companies and organizations can make voluntary changes to their benefits options. In this article, we’ll be discussing the importance of choosing an appropriate health insurance plan during open enrollment and why it’s a good idea to review your plan every year to determine whether it’s time to make a change.
It used to be that you could enroll in a health insurance plan at any point during the year. Of course, this didn’t mean that you would get health insurance, but you could apply for it whenever you needed or wanted it. However, once the Affordable Care Act went into effect, open enrollment became the only time you could sign up for health insurance (in addition to a few exceptions, such as losing a job or getting married).
Why Open Enrollment Exists
Open enrollment was implemented because the Affordable Care Act required health insurance companies to provide coverage to anyone and everyone regardless of pre-existing conditions. This meant that insurance companies needed to ensure they could afford to pay for medical treatments for a greater number of individuals filing claims.
As a result, open enrollment periods were designed to prevent adverse selection, which happens when healthy individuals choose to go without coverage because they don’t currently need or use medical care very often. When not enough healthy people enroll in health insurance, insurance companies have to charge excessively high premiums to cover all the claims they’re paying out for unhealthy people who do have health insurance.
Open enrollment encourages more healthy individuals to enroll in health insurance before they need it, as they’d have to wait until the next open enrollment period to sign up. When more healthy people are paying premiums, the health insurance company can then afford to cover the claims filed by a smaller number of unhealthy people without raising prices too drastically.
A designated open enrollment period also limits the number of people who would have signed up for healthcare coverage right after a diagnosis or injury, keeping the cost of premiums (relatively) stable and affordable.
The Importance of Health Insurance Coverage
It’s impossible to predict when you’ll need health insurance coverage. Although we don’t like to think about it, a car accident could happen at any time, as could a cancer diagnosis, an unplanned pregnancy, a severe bout of strep throat requiring antibiotics, or of course, a particularly nasty case of Covid-19 that requires multi-day hospitalization.
According to one report, the average cost of an emergency room visit for uninsured individuals can range from $150–$3,000 or more, with hospital bills exceeding $20,000 for critical care services or surgeries. Urgent care is more affordable than the ER, but can still cost between $80 to $440 or more per visit without insurance. Therefore, it’s best not to risk going without coverage, especially because we’re still experiencing a global pandemic.
How Your Health Insurance Benefits Affect Your Financial Plan
Healthcare has always been a financial concern for Americans, as the cost of medical services and treatments is extraordinarily expensive in our country. Unfortunately, the pandemic pushed healthcare to the number one spot of financial concerns Americans had in 2020, rising above unemployment, market volatility, and debt management.
Taking steps to plan for healthcare costs and choose the most optimal healthcare plan available in your benefits selection can have a considerable impact on your overall financial situation. Of course, health insurance is also not cheap. If your health insurance premiums are so expensive that you can’t afford to save for retirement or cover your monthly expenses, that’s not ideal either.
That’s why choosing the right health insurance is such an essential part of a comprehensive financial plan. For healthy, young individuals who don’t use medical services often, it may be best to enroll in a cost-effective plan with a higher deductible. On the other hand, retirees planning for future age-related health issues may need to consider a plan with higher monthly premiums but a lower deductible.
No matter where you are in life, there are likely more or less optimal health insurance plan options available in your selection of employee benefits. Finding the right option requires you to align your current and anticipated medical needs with the options you have available. If you don’t know your options, you risk making the wrong choice.
Things to Consider When Reviewing Your Health Insurance Benefits
Choosing the right benefits today can have a tremendous impact on your future. So even though it may take some extra time and effort, it’s important to learn everything you can about your benefits options before or during your open enrollment period.
If your workplace offers a benefits fair, seminar, or workshop, I encourage you to do everything in your power to attend. You may learn about options that work well for you that you otherwise wouldn’t have known about. You may also have the opportunity to get your questions answered by your company’s human resources department or representatives from the insurance company itself.
Once you know more about your options and the differences between plans, it’s time to evaluate your and your family’s current and anticipated medical expenses. The plan you choose should ideally be affordable for your monthly budget and provide or cover the following:
- Prescription drugs your family needs
- Maternity care if you plan to have a baby
- Any current conditions or anticipated procedures that require care from specialists
- A deductible and out-of-pocket maximum that you can afford
- Whether your current doctors are in the plan’s network
You may have other considerations, but I hope you can see how important it is to do this research and make sure you’re choosing a cost-effective plan that also covers your needs.
Develop a Comprehensive Financial Plan Today
It can be challenging to choose the right plan if you don’t have a solid understanding of your current financial circumstances, your financial goals, and the steps you’re taking to reach those objectives. A comprehensive financial plan considers all your financial resources, present needs, and goals to clarify the decisions that will help you progress toward a future you desire.
At Caviness Wealth Management, we specialize in developing custom comprehensive financial plans to help our clients pursue the future they’ve envisioned. Although we are not insurance agents, we can help you evaluate your current and future needs to make more informed decisions about your benefits. To see if we can help you gain clarity, click here to schedule a conversation today.
Content in this material is for general information only and is not intended to provide specific advice or recommendations for any individual.
