Benefits open enrollment is about choices. Should I change health plans or stay in the same plan? As HSA-compatible health plans become a more common option, evaluating your options has become increasingly more important.

During 2018 open enrollment, the most recent year for which information is available, 70% of large employers offered a traditional health plan alongside an HSA-compatible high deductible health plans (HDHP)¹.

The best choice may not be the obvious one. Nerdwallet, an online financial advice site, cites one study that found more than 80% of employees at one Fortune 100 health plan chose the wrong plan for themselves financially and chose the low-deductible plan which ultimately cost them more.

With employees charged with making the decision of which health plan to enroll in, how can the details be sorted out to make the right selection? Consider these things:

Analyze Your Healthcare Spending

Review your medical expenses for the current year. Look at bills and receipts–including doctor visits, pharmacy, vision and dental expenses. This can provide a good indication of medical expenses you may incur in the next year. If you didn’t save receipts, you’ll have to estimate what you’ve paid. Be careful not to over or underestimate, as this number is important to your evaluation and ultimate choice of health plan.

You will also want to consider any planned expenses for the coming year, such as having a baby or a planned knee replacement. These procedures can affect out of pocket expenses or help to meet your deductible.

Some employers make online comparison tools available. These tools allow employees to plug their information, such as previous expenses, number of dependents, type of coverage – whether family or individual–and then offer up what the expenses will be under each type of health plan.

Review Health Plan Documents

Each health plan option will have documents that includes valuable information that can give a clear picture of the real costs for each plan.

Deductibles: A traditional health care plan will typically have a lower deductible than an HSA-compatible plan, but higher premiums. For 2020, the minimum HDHP deductible (as set by the IRS) are $1,400 for individuals and $2,800 for families.
Premiums: While the traditional plan will have a lower deductible, the premiums are higher. Pay careful attention in the difference in monthly premium costs from one plan to the other. Compare the premium difference between the two plans at your coverage level (family or individual) and multiply by 12. This will provide the annual premium difference. Should you decide that an HSA-compatible plan is right for you, the easiest way to begin funding a health savings account – the funds that will help carry you until you meet the deductible – is to move the premium difference to the HSA.
Co-payments. These fees are typically a set amount, and are often paid at the time of service. This is a percentage of costs paid after reaching your deductible. A typical percentage is the patient pays 20% and the insurance company pays 80%.
Out-of-pocket limit. This is the most you could pay in a year for covered services.

To get a good idea of the right plan for you, you’ll need to look at all the information together. You may find that a higher deductible comes with other benefits like lower premiums, lower out of pocket limit or limited co-payments and co-insurance that make the HDHP more desirable. Your plan documents may even include coverage examples that breakdown all the different costs associated with a specific procedure.

Tax Benefits

Next, consider the HSA tax benefits that are only available when you select an HSA-compatible plan. HSAs are what financial experts call triple-tax advantaged, and there’s simply no more effective way for an employer to impact an employee’s long term personal financial wellness. Contributions, either made by you or your employer, are made pre-tax, lowering your income and FICA taxes. The funds that carry over also grow tax free while they remain part of the account. Funds that are used for HSA-qualified expenses are withdrawn tax free. What’s more, funds that are withdrawn for any reason after 65 incur no penalty, though if the funds are not used for HSA-qualified expenses, income taxes must be paid at your then income tax rate, which may be lower than it is today.

Funding the HSA

Generally, the goal is to fund the HSA with enough money to cover the deductible. In addition to contributing the difference in premium cost to the HSA. There are several other methods of funding the account. One way is to take advantage of any employer contributions available to you. Not every employer contributes to employees’ HSAs, but those that do will often contribute a couple of hundred dollars to more than $1,000 each year to help offset the higher deductible while also providing an incentive to choose the HSA-compatible plan. Remember, all funds contributed to the HSA, whether contributed by the employer or yourself, are yours to keep without any deadlines to spend it – “no use it or lose it” provisions such as those associated with a flexible spending account.

What’s Next?

Armed with your data:

- The difference in premiums, deductibles, out-of-pocket maximums, copayments and coinsurance
- Funding options for the HSA, including contributing the premium difference as well as any possible employer contributions.
- How much you spent on health care the previous year.
- HSA tax benefits.

That plan that is financially right for you and your family should become more apparent and make the open enrollment less stressful. If the HSA-compatible plan prove to be the best option, the Bend HSA offers a technology laden health savings account with artificial intelligence based on behavioral economics and the ability to teach and discover expenses many accountholders miss. It is also user-friendly and is not expensive.

¹https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/high-deductible-plans-more-common-but-so-are-choices.aspx