Why It Matters:
  • Autumn is when many health insurance plans schedule open enrollment for the coming new year.
  • Plans change. Your clients may have new offerings to choose from and new ways to save for care.
  • Two working spouses can compare workplace family plans to find what works best for them.

As clients come in for year-end financial “checkups,” health insurance may be a new wrinkle.

For many, fall is the time to select health insurance for the coming year, and that includes those who get insurance at work and those on Medicare or private insurance. Your clients may not understand some of their options, including the health savings account (HSA).

So many choices: A one-stop-shop HMO? A high-deductible plan with lower premiums? A spouse’s workplace plan?
There may be no single right answer, but having all the information can help your clients make an informed choice. One thing to remind them about is the federal Affordable Care Act requires everyone to have qualifying health care insurance (with some exceptions) or make what’s called a “shared responsibility” payment at tax time.

Workplace plans

Many people obtain insurance through a workplace plan offered by an employer. On average, a private employer will pay about two-thirds of the total premium. A workplace plan may also allow a spouse and children to enroll as well. For a working couple, it can make sense to compare the plans of both employers. And remember, plan options and costs can change year to year.

There are a variety of types of health insurance, including:

  • A health maintenance organization (HMO), which usually limits coverage to care from doctors who work for the HMO. These may offer lower premiums (the cost of coverage), and the insured generally chooses a primary care provider with the HMO.
  • An exclusive provider organization (EPO) may also offer lower premiums, but the insured must use the providers in the network, with much higher expenses outside the network.
  • A preferred provider organization (PPO) contracts with hospitals and doctors in a network and may charge less in network (but there’s the option to go outside of the network and potentially pay more).

This is just a sample of the types of available plans. Before choosing health insurance, clients may want to consider which professionals and hospitals are included in the network (and where they are located); the premium; the deductible; and out-of-pocket costs.
Open-enrollment periods can vary by employer, but the period is frequently in the fall.

The Marketplace (aka the “exchange”)

Those not covered by an employer plan may seek insurance on the Health Insurance Marketplace (sometimes called the “exchange”), created by the Affordable Care Act. The Marketplace offers a variety of plans, including types mentioned above. Clients can learn more at healthcare.gov.
The open-enrollment period for 2018 coverage through the Marketplace is from November 1 to December 15 for coverage that will begin January.

Individual market

Health insurance is also available on the individual market outside the government marketplace. Healthcare.gov provides a link to available providers and a tool for comparing plans online at finder.healthcare.gov.

Saving for out-of-pocket expenses

Clients may have heard of additional insurance saving options offered through their employers, but may not fully understand them. Qualifying plans with higher deductibles may allow your clients to open a tax-advantaged savings account for health care, a health savings account (HSA). But they could be mixing it up with the flexible spending account. The money placed in an HSA stays with the owner if it’s not used.

An HSA requires an eligible insurance plan. Those covered at work may find their employer has added an eligible plan for the coming year. Remind your clients, an employer can change offerings year to year, don’t just tune out the benefits coordinator at enrollment time.

An employer may also allow a flexible spending account (FSA), another tax-advantaged way of preparing for health expenses. Funds in an FSA must be used for expenses clients incur in the year the money is set aside. Any money that’s not used in the year it’s saved reverts to the employer (although some may allow carryovers of some of the money or grace periods). The end of the year could be a good time to ask clients if they set aside money in an FSA and how they plan to use it in the remaining months.

Medicare and its key parts

Most American workers contribute each pay period to Medicare, the federal medical insurance program for seniors. At age 65, your clients become eligible for that coverage. If you have clients who have turned 65 during the year and are not already claiming Social Security benefits, they may need to sign up. The two main pillars of Medicare are Part A (which covers hospital charges) and Part B (which pays for medical care). Most people have already paid for Part A through a lifetime of payroll deductions, but clients new to the system may be surprised by the Part B premium.
Those turning 65 can sign up during an initial seven-month enrollment period (from three months before turning 65 to three months after the month after turning 65). And each year there is an open enrollment period (October 15 to December 7) where those covered may consider additional coverage, such as prescription drug coverage.

Skipping it? There’s a penalty for that.

What if your client is healthy and just decides to skip the whole health insurance quest? If they could afford coverage in 2017 and just didn’t bother, there’s that whole “shared responsibility” thing mentioned above which will require people who skipped coverage to pay the federal government $695 per adult and $347 per child, up to a family maximum of $2,085 each year.
For many clients, back when they started work, insurance offerings were simpler. Today, they may be struggling with the options, deductibles, and savings plans being offered. As a financial professional, you can help them walk through the financial consequences of each choice. To learn more about explaining Medicare to clients, check out our resources page and the New Age of Advice article “Medicare: 10 Tips for Explaining It to Clients.”

Things to Consider:
  • The health insurance plan your clients signed up for five years ago may not be the best fit today. Have they looked at all options?
  • A health savings account (HSA) may be a new option if the employer has switched to an eligible health plan.
  • Without a valid excuse (and there’s a list), not having health insurance could cost your clients.