Open (Enrollment) Season

‘Tis the season! No, no, no…not for turkey or Santa quite yet, but to choose your health benefits from your employer. I know, it doesn’t sound nearly as fun as Thanksgiving, Christmas, or Hanukkah but it is vitally important to your financial future and your physical well-being. When trying to navigate the open enrollment period, there are often many options and it can be quite intimidating. So let me try to cut back some of the brush for you.

Maybe the most confusing piece of choosing between all these benefits is when it comes to your medical insurance coverage. Oftentimes employers will offer several different coverages to their employees that are often titled with alphabet soup: HMO, PPO, HSA, etc. Health Maintenance Organization (HMO) plans tend to have lower monthly premium amounts, but if you want to see a doctor that is “out-of-network” you will need to receive a referral from your primary care physician (PCP) first. Preferred Provider Organization (PPO) plans, on the other hand, typically have a higher monthly premium but in exchange, you do not need a referral from your PCP before seeing a specialist or an out-of-network professional. Although out-of-network medical professions will likely bring a higher bill to your inbox. Before you choose an HMO plan just because it is cheaper, if you have a PCP that you like, you should check to see if that provider is considered “in-network” or not. 

Health Savings Accounts (HSA) are another tricky aspect of health insurance. The quick low-down on HSA’s is that they are only available with health plans that have high deductibles (for 2023 this number will be $1,500 for families and $3,000 for individuals), both you and your employer can contribute funds into them each year, and they are triple tax deferred accounts! Triple tax deferred means that you are not taxed on the money you put in, if you take the money out for qualified medical expenses it is not taxed, and the earnings on the investments is not taxed if you use them for medical expenses. A true win-win-win!

Another key facet of open enrollment is being able to elect group life insurance and group disability insurance. Life insurance and disability insurance are instrumental in most financial plans and they can be provided by different sources: group insurance through your employer or an individual policy purchased through a third-party company. Let’s talk about life insurance first. The great part about group life insurance is that sometimes it is cheaper than if you were to buy term life insurance from a third-party, the downside to that is when you leave your current employer, typically the policy itself stops or it becomes significantly more expensive. So when looking to make the decision of whether you buy-up life insurance at your current company during open enrollment or from a third-party company you should 1) talk to your financial professional about whether you have a life insurance need, 2) do an internal check to see how long you plan to be at the company and how long you need the insurance, and 3) do a quick price comparison of how much life insurance would cost via group benefits versus a third-party.

Disability insurance is often forgotten about yet it is at least as important as life insurance. Because when you die, your family will likely have less expenses due to you no longer being there; however if you are disabled and unable to provide an income for your family, you will likely have even more expenses than you do now while not earning income. I often see families not protected enough for these situations. I do have some good news though, oftentimes companies let you participate in their group disability insurance plan. And believe it or not, frequently these plans are cheaper than getting an independent policy from a third-party provider. However, just like group life insurance, a group disability policy typically does not come with you when you leave your company so you will need to be mindful of that. Also, you will want to keep an eye out for what the company considers “disabled” in their group plan. Oftentimes if you can do any job, they will not pay you disability benefits, even if that job pays significantly less than your old role. The nice thing about obtaining an independent policy is that you can customize it to fit your exact needs. To determine what, if any, need you have for disability insurance, I would highly recommend talking to your financial professional.

While many people only think of investments when they think of financial professionals, if your professional is not talking to you about strategies to better manage your risk (i.e. health, life, disability insurance, etc.), you should bring it up to them or find someone who will talk to you about it. Life and disability insurance, when needed, can be an instrumental part to any financial plan.

Please keep in mind that this blog is for informational purposes only and not meant as financial or medical advice for the readers. If anything you read here sparks your interest or raises further questions, please reach out to me at [email protected] for a free consultation.