If Open Enrollment has you perplexed, you’re not alone. Medicare is a messy can of worms, the menu of corporate benefits seems to get bigger every year, and the Affordable Care Act—also known as Obamacare—seems to be changing by the minute. But picking appropriate coverage is one of the most important things you can do to protect your physical and financial health. Here’s what you need to know to get started:
Whether you are already enrolled in Medicare or you’re turning 65 this year and are new to the maze of options, the enrollment process can feel overwhelming. Almost everyone is eligible and must enroll in Medicare Part A, which covers hospitalization. There are many Medicare Part B options, and the choice is not simple. Then there is Part C—Medicare Advantage Plans that often sound too good to be true (think free gym memberships, cheaper drug plans, and more) but come with some limitations and costs. Medicare Advantage plans replace Medicare Part B, and not all Part B options may be available if you change your mind—even during Open Enrollment. Making the best possible decision from the start is vital. There are also multiple drug plans, and your best choice depends on your current prescription needs, which means an annual reassessment of your drug plan is a must.
The good news is that help is available. HICAP (the Health Insurance Counseling & Advocacy Program) provides objective information and counseling about Medicare. The service is very good—and it’s free. Of course, we’re always here to help as well. Open Enrollment for Medicare closes on December 7, so be sure to explore your options now rather than rush your decision as the deadline looms.
If you’re fortunate enough to have a corporate benefit plan, take advantage of Open Enrollment (which is likely happening right now) to review and update your benefit elections and make the most of your options.
- Health Insurance. Most companies offer a variety of options, including PPO, HMO, and HealthSave plans. The costs for these plans vary widely, so it’s important to explore the options carefully to choose the plan that balances premium fees with out-of-pocket expenses based on your family’s expected health needs. If you have access to dental and vision insurance, take what’s available to be sure you and your family are covered.
- Life Insurance. Life insurance is not for you, per se, but to replace your income to support your dependents. Group life insurance offered through your employer is often priced well, so do take advantage of it. However, corporate coverage does not protect your insurability when you leave the company due to a job change or retirement. Plus, because the premiums for group life insurance go up every year, private, level-term insurance is sometimes a better option. Work with your advisor to determine if supplemental private life insurance makes sense in your situation. And while many plans offer coverage for your children, this typically makes sense only if you don’t have funds for funeral expenses.
- Disability Insurance (DI) and Long-term Disability Insurance (LTD). Knowing that the chance of becoming disabled in some way is much greater than the chance of dying early, this is likely the most important insurance you can buy. It’s expensive, but considering that it covers 60-70% of your salary should you become unable to work, it’s well worth the price tag. Note that because you pay for group DI with pre-tax dollars, the benefits are taxable income. Private DI is paid with after-tax dollars, so the benefits are tax-free, which can make it even more valuable. Talk to your advisor to determine your best option.
- Health Saving Accounts (HSAs). If you have access to an HSA and can afford to pay the high deductible required, these plans can be a great retirement savings tool. HSAs allow you to contribute using pre-tax money, invest that money in mutual or other funds to maximize growth potential, and then withdraw assets for qualified medical expenses tax-free.
- Flexible Spending Accounts (FSAs). Unlike HSA contributions that can be used at any time, contributions to an FSA accounts must be used in the same calendar year. FSA contributions can be used for health care and dependent care, and they can help reduce your taxable income. The key with FSAs is to plan well to be sure every penny is spent before December 31.
- Accidental Death & Dismemberment (AD&D). This is one benefit that I rarely recommend. Yes, it’s cheap, and yes, it offers an extra boost to your life insurance benefits in certain cases, but this is one lottery you don’t want to win. Your dollars are probably better spent elsewhere.
- Pre-paid Legal Plans. It’s easy to overlook a legal plan, but it can be one of the more valuable benefits, primarily because these plans offer low-cost access to legal assistance that could otherwise come with a hefty price tag. While I don’t recommend using this type of service for complex legal needs, from updating your Will and Powers of Attorney to reviewing rental and other agreements, a pre-paid plan may be the key to taking care of these important tasks sooner rather than later.
Thanks to the current administration’s push to derail Obamacare, there is more confusion than ever about choosing ACA health plans. In California, the Open Enrollment period for 2018 opens November 1 and closes January 31, 2018. This is for all plans selected through Covered California and in the open market. Despite all of the news in Washington, the plan still offers tax credits and cost-sharing subsidies to help those who qualify afford premiums and reduce out-of-pocket costs. That doesn’t mean nothing has changed. Rates for all plans are being raised by about 12% due to the annual rate hike, and silver-level plans are increasing by an additional 12.4%. Actual premiums depend on factors such as where you live, your income, what level of coverage you choose, and which insurer you pick.
Just like with Medicare, it’s wise to get help when choosing your options. The Covered California website offers online videos and information on where to get in-person help from a certified insurance agent.
Choosing your benefits may not be the most exciting item on your to-do list, but Open Enrollment is only open for a limited time, so be sure to make the time to explore your options and make smart choices for you and your family. If you need more guidance, please reach out. We’re always here to help!