Don’t delete your employer’s reminders to sign up for next year’s employee benefits. It could cost you.
Bad decisions cost money. More than half of workers estimate that they’re wasting $750 a year due to their open enrollment mistakes, according to Aflac.
“Most people don’t take a look at the total cost of a health-care option,” said Kim Buckey, vice president of client services at DirectPath, a benefits consultancy. “The knee-jerk reaction is to see what costs you the least out of your pocket every paycheck.”
Here are five benefit enrollment decisions that could ruin your finances in 2019.
Perhaps the easiest thing to do during enrollment is to roll over last year’s benefits.
After all, close to half of U.S. workers spend 30 minutes or less reviewing their benefits before signing up, according to data from Unum.
This is a huge mistake if you had a year of major life changes, including getting married or having a child. In both cases, you’d have to consider including these new family members under your coverage.
Here’s another surprise that could potentially wreck your benefits for 2019: Being newly diagnosed with a health condition and reelecting last year’s plan without any regard for deductibles, prescription costs and treatments.
Surprise medical costs can burn workers’ finances. See below.
“When you get an enrollment guide, at least take a look at it and skim for a page that says what’s new so that you’re aware of any substantive changes to your plan,” said Buckey.
There’s more to the cost of health care than just the premiums you pay.
Before you commit to a plan for next year, review your out-of-pocket maximums, your copayments, your coinsurance – the percentage of costs you share with your insurer – and your deductible.
More than 9 out of 10 employers expect to offer a high-deductible health plan, according to the National Business Group on Health. Per the IRS, the minimum annual deductible for these plans is $1,350 for self-only coverage and $2,700 for family plans.
These plans are often coupled with health savings accounts, which allow you to put money away on a pre-tax basis, accumulate interest on a tax-free basis and withdraw money free of taxes, provided you’re paying for qualified medical expenses.
Buckey saved herself additional costs when she opted to switch from a high-deductible health plan to a preferred provider organization – in which providers offer plan members services at reduced rates.
The change worked for her because she had a family member with a new health condition that required prescription drugs. The overall cost would have been higher if she stuck with the high-deductible plan.
“Look at the total cost of the plan, especially if you have family members who are prone to getting sick,” she said. “High deductible plans aren’t a bad thing, but it isn’t right for everyone.”
Some employers hit workers with additional charges for tobacco use, putting them on the hook for higher premiums.
The amount is significant: The median annual reduction in premiums for each employee who doesn’t smoke is $520, according to Mercer.
Another surprise cost would be spousal surcharges, where you pay extra to add your spouse to the plan if he or she has other coverage available.
Close to half of the 555 employers polled by Willis Towers Watson in June and July 2017 expect to use spousal surcharges when other coverage is available in 2019.
Though your employer may start sending out benefit enrollment reminders as early as late summer, you generally have two to three weeks in the fall to review your plan and sign up for coverage.
“I’ve heard horror stories of people who ignored the 18,000 reminders that the window was closing and now it’s the day after and they want to change something,” said Buckey.
For the most part, after the benefits enrollment sign-up period has closed, you are locked into your plan for the following year.
The one exception to this rule is if you have a qualifying life event, such as loss of health coverage, marriage, divorce or having a child.
The sweetener for participating in a high-deductible plan is the ability to save money in a health savings account on a tax-favored basis.
In 2019, you can save up to $3,500 in an HSA if you have self-only coverage or up to $7,000 for a family plan. If you’re 55 and up, you can make an additional contribution of $1,000.
Employers can also help you fund this account: More than 3 out of 4 employers that offer high-deductible plans offer some kind of matching contribution or seeding for workers with HSAs, according to data from Alight Solutions.
Unlike flexible spending arrangements, HSA balances roll over from one year to the next, giving savers an opportunity to accumulate and invest their money over long periods of time.
“It’s pretax, it will reduce your taxes over the course of the year, and it’s a nice cushion for expenses,” said Buckey.