How To Navigate Open Enrollment Successfully

Uncategorized Nov 25, 2024

What is Open Enrollment?

Open Enrollment is the one time every year that you are able to make changes to your health insurance, and other benefits through your employer, or through HealthCare.gov without a life event occurring during the year (Marriage, Child Birth, etc). This is the time of year where your financial trajectory can be significantly changed for the good, or if not handled correctly, for the bad.

What Are The Different Options in Open Enrollment?

Focusing on employer provided healthcare and benefits, the biggest decision you will typically be faced with will be whether to select a full rate health insurance plan (PPO, HMO, etc), or a High Deductible Health Plan (HDHP). Every person's situation will be unique, however the HDHP unlocks the best retirement account known to mankind, the Health Savings Account (HSA)! The HSA is an account that is triple tax free.

Health Saving Account Benefits

Contributions are tax free now
Your account grows tax free
Distributions are tax free when used for medical expenses

This means that if you are able to fund your current year medical costs out of pocket, and contribute as much as possible to your HSA, this account can grow tax free until retirement!

2020 HDHP & HSA Limits

Health Care Category	Individual	Family
HDHP Minimum Deductible	$1,400	$2,800
HDHP Max Out-of-Pocket Expenses	$6,900	$13,800
Maximum HSA Contribution	$3,550	$7,100

High Deductible or Low Deductible?

At the end of the day, you will need to decide what is right for your own financial situation, however their are a few basic themes to consider when deciding what plan is right for you. Your total cost for health care in a given year is a combination of three things: Premiums Paid, Annual Deductible, and the Out-of-Pocket Maximum. I have included a table below summarizing which amounts are higher or lower with each plan. As you can see, if you have a full rate plan, your premiums are substantially higher than if you have a HDHP, however your deductible with a HDHP could be four times higher.

	PPO	HDHP
Premiums Paid	High	Low
Annual Deductible	Low	High
Out-of-Pocket Maximum	Lower	Higher
Co-Pays	Typically	No

Every plan is different, however to help you compare, you can add up the Total Premiums + Annual Deductible = Total Base Spend. Total Base Spend is simply the amount of money you can expect to payout under each plan if you max out both deductibles. If you are selecting health insurance through your employer, you should take full advantage of your Benefits Manager or Human Resources Department to help you compare your specific plans. We have put together an illustrative example below to show how the comparison can be done. Some organizations that offer HDHP, will also contribute money towards your HSA account that you are able to use towards your health related expenses including premiums, deductible, and co-insurance.