Open Enrollment Season: What you need to know

It’s benefits season and that means it’s time to make some decisions about your coverage for 2023. Many people we talk to get a bit overwhelmed by all the benefit decisions they’re required to make in a short period, with little guidance. Sometimes the options are many and sometimes the information isn’t that clear. Since your choices lock in for the next 12 months, it’s important to review and select what’s most appropriate for you.

3 Categories of Open Enrollment

Medicare Advantage Open Enrollment: If you are a retiree, your window to make changes to your 2023 coverage needs to happen between the dates Oct 15- Dec 7. Each year you have the ability to join, switch, or drop a plan. It is important to review this each year to assess cost, coverage and medical provider availability.

Healthcare.gov: If you are still of working age and do not have coverage you might need to look at Open Enrollment for ACA or Healthcare.gov. This runs from Nov 1-Jan 15 2023 for coverage next year. We can’t stress the importance of having healthcare coverage even if it is just catastrophic coverage.

Either of these options can be reviewed with an independent agent to help you navigate the marketplace and various options.

Employer Benefits: If you do have employer benefit coverage you need to check with your employer for your specific dates which are usually around October/November. Besides healthcare coverage and what plan to choose, there are likely other benefits available through your employer that are often overlooked. The type of package your workplace puts together varies, but there are a lot of benefits you may already be paying for and some could provide some tax benefits too.

Healthcare and tax-free savings

When it comes to your healthcare choices, look at other items outside of just cost. Evaluating your current and potential healthcare needs can help you make the right choice. Sometimes the cheaper plans don’t allow you to access your current doctors or specialists you need. Spreadsheets and calculators may not be fun or sexy, but they’re very handy when comparing the monthly premiums, deductibles, max-out of pocket costs, co-pays and prescription fees. There are online calculators like this one that can make this chore easier.

These days many employers also offer high deductible plans, which can be less expensive each month but you will have a higher deductible than most options. Only high deductible plans allow for a Health Savings account or HSA. In 2023 HSA accounts allow you to put $3,850 per year for a single person and $7,750 for a family. These amounts are funded from your paycheck and help you reduce your taxable income. One of the biggest benefits of an HSA is the ability to continue to accumulate savings each year and use the funds for medical expenses in retirement. Before choosing the right plan for you, spend some time thinking about your health and if you’ll need a lot of services, medication, appointments, surgeries or therapies next year. If so, you will want to run the numbers between a high deductible plan and a PPO-type plan (i.e. low deductible & co-pays, higher monthly premium).

Often confused with the HSA is the Healthcare FSA. This plan allows you to put up to $3,050 in each year to be used for current year healthcare expenses. The policy here is use it or lose it. Also, if you fund this account and half way through a year you end your employment or change companies, you can lose your FSA benefit cash if you did not have enough qualified medical expenses up to the point of separating from your employer. While a very useful account to help reduce income tax and pay for medical expenses, don’t forget about these rules that limit its benefits.

To make matters a little more confusing, there is another type of FSA account. Not to be confused with Healthcare FSA is the Dependent Care FSA. This is separate from the healthcare and you can contribute $5,000 annually if you are married filing jointly, from your pre-tax income. The funds you contribute in 2023 can be used qualifying expenses for your dependents. Qualifying expenses can be anything from babysitting, daycare, after-school care to summer camps for kids up to age 12. If you’re already paying for these expenses, you might as well get a tax break while you do it.

Do you need life insurance?

Life insurance is another common benefit through the workplace. This is typically a term policy for most employers (the exception being some executive compensation plans which differ from this). This policy is often inexpensive and allows you to get coverage with either a flat amount or 1-2x the amount of your annual salary often without a physical exam. The premium is deducted from your paycheck and set up is easy. What you need to consider: is this enough to cover your family in the event of a premature death. If you own a home with a mortgage and/or you have children, chances are you will need a lot more coverage than what your employer can offer. Your financial advisor can help you determine if you have enough. Usually life insurance through an employer can be considered inexpensive but it is always important to compare. There are instances where your workplace benefits can cost more compared to purchasing a policy yourself. In the event you separate from your place of employment, you typically can’t take an employer policy with you, but you would be able to keep your privately purchased plan. The younger and healthier you are is generally the best time to lock in a 20 or 30 year term policy. While this may sound like a long time, coverage is needed throughout this phase of your life to cover your mortgage and your children’s younger years.

Additionally, while no one wants to need this coverage, getting a policy for your children could be helpful. You can usually check a box to add a coverage option for underaged children when completing your benefits enrollment. This is one of those things that we advise to typically check off and consider the frame of mind if we have it, hopefully we’ll never have to use it.

What if you have an injury or long-term illness?

If you rely on your paycheck, it’s smart to protect it with disability insurance. If your family relies on your paycheck, then it’s even more imperative to protect it – from short term and long term illness or injury. People are far more likely to get in a car accident, have a fall or get a bad illness than they are to die prematurely. Will you be able to get to work or do your job with a broken leg or hand? How will you work if you need surgery and are ordered to stay in bed for 4 – 8 weeks to recover? While unexpected, these events are more common and can wipe out your entire savings very quickly, if your income is not protected.

If your employer offers these benefits, they will typically pay for them. This means your disability check will be taxable when you receive the benefits. For example, if your disability plan pays you 66% of your salary per the benefit, you still have to pay tax on that. It often means even if you are fortunate enough to have disability insurance, you need to factor into your financial plan what your income replacement looks like when you are bringing home half of the income you were before. Some workplace benefits will allow you to “buy up” additional disability insurance and you can also purchase more outside of your employer. This is a really important item to review with your financial advisor so you are prepared financially in the event you cannot work due to a disability.

Don’t overlook the extras

There may be other ancillary benefits that can save you money too, like discount programs or legal services. You might have access to work with an estate attorney to help with a Will for your family, which can be advantageous if you haven’t already set this up. Many employers also offer a number of free counselling and therapy sessions. Know your benefits and who to contact when you need help that’s already covered by your plan.

There are endless options with benefits and this makes enrollment season all the more important. Start planning for 2023 by evaluating and selecting the benefits that will help you maximize your options and dollars. A few changes like this can save you a lot of money and potential headaches.

M & A Consulting Group, LLC, doing business as CAM Investor Solutions is an SEC registered investment adviser. As a fee-only firm, we do not receive commissions nor sell any insurance products. We provide financial planning and investment information that we believe to be useful and accurate. However, there cannot be any guarantees. This blog has been provided solely for informational purposes and does not represent investment advice or provide an opinion regarding fairness of any transaction. It does not constitute an offer, solicitation or a recommendation to buy or sell any particular security or instrument or to adopt any investment strategy. Past performance is not a guarantee of future results. Diversification does not eliminate the risk of market loss. Tax planning and investment illustrations are provided for educational purposes and should not be considered tax advice or recommendations. Investors should seek additional advice from their financial advisor or tax professional.