Open enrollment season is an essential time for understanding and selecting the benefits that will shape your financial and physical well-being for the coming year. However, navigating through the sea of insurance jargon and benefit terminologies can be overwhelming.
Your life is constantly changing, which means your benefits should too. From getting a raise to expanding your family, there are important factors to consider.
Whether you’re a seasoned employee or new to the workforce, understanding these terms will empower you to maximize your benefits package and secure your future with confidence. Make sure you have the best coverage by understanding these five key terms before your next open enrollment:
1. Voluntary Benefits
These benefits are typically paid for entirely or partially by employees through payroll deductions, making them a cost-effective way to customize your benefits package based on your specific needs and preferences. Voluntary benefits are all about choice and making smart financial decisions.
The benefits are typically at a group rate that is more affordable than comparable individual plans. Examples of voluntary benefits include life insurance, disability insurance, dental insurance, vision insurance, critical illness insurance, accident insurance, and pet insurance.
Voluntary benefits provide you with additional financial protection beyond what is covered by your employer-provided core benefits.
2. Pre-existing Condition
When starting a new health plan, it is important to disclose any health issues you had before your coverage start date to ensure proper protection. This could be anything like asthma, allergies, diabetes, or even a past injury.
Insurance companies traditionally view pre-existing conditions as higher risk, because these individuals are more likely to need medical services and treatments. However, with the enactment of the Affordable Care Act (ACA), insurers in the individual and small group market are prohibited from denying coverage, charging higher premiums, or refusing to cover treatments due to pre-existing conditions.
Your insurance company might not cover the costs related to your pre-existing condition for a certain period of time when you first join their plan. However, in many places, there are laws that protect you from being completely denied coverage just because you have a pre-existing condition. So, even if you have one, you can still get health coverage. Just keep in mind that there might be a waiting period before the insurance fully covers expenses related to your existing health issue.
However, it’s important to note that these protections do not necessarily extend to all types of health insurance. Therefore, it is crucial for you to understand your insurance policy, your rights, and the potential limitations when it comes to pre-existing conditions.
3. Monthly Premium
This is the monthly fee you must pay in order to enjoy the benefits and savings your health insurance plan provides. It works like a subscription fee that you pay every month to stay enrolled in your health insurance plan. This premium payment is separate from any out-of-pocket expenses you may have when you receive medical services, like copayments or deductibles.
Your monthly premium is calculated by your health insurance company based on several factors. such as age, location, type of coverage, and the number of people covered under the plan. For example, if you have family coverage, the premium will likely be higher than an individual plan because it covers more people.
It’s not only important to choose the right coverage for you but also to choose a plan where you can afford the monthly premium. Not being able to afford your premium is not considered a qualifying life event, so you will be stuck paying that monthly premium for a year.
By paying your monthly premium, you ensure that you have the support you need when you visit the doctor, get medications, or receive medical treatments.
4. Deductible
A deductible is a specific amount you have to pay before your insurance coverage kicks in to cover your medical expenses. You can think of it as an initial payment you have to make before your insurance company starts sharing the financial responsibility with you.
To illustrate, if your policy has a $1,000 deductible, you’ll have to pay the first $1,000 of services out of pocket. After you’ve met your deductible, you usually only pay a copayment or coinsurance for covered services.
On a similar note, it’s important to know what your out-of-pocket maximum amount is. It’s the maximum amount you will have to pay in a given year for covered medical services. It includes the deductible, as well as other out-of-pocket expenses like copayments and coinsurance. Once you reach this maximum limit, your insurance company takes over and pays for all covered medical services for the remainder of the year.
It’s worth noting that not all insurance plans have a deductible. Additionally, the deductible amount varies between insurance plans. Generally, plans with lower monthly premiums have higher deductibles, while plans with higher premiums tend to have lower deductibles.
5. Health Savings Account (HSA)
A Health Savings Account is a tax-free account for qualified medical expenses, making payment and accounting easy. This savings account is available to those enrolled in a high-deductible health plan (HDHP). An HSA can cover a wide range of costs, including deductibles, copayments, coinsurance, and other eligible healthcare expenses not covered by your health insurance plan. Be sure to review your plan to see what is considered a qualified medical expense.
A unique feature of an HSA is the funds in an HSA roll over year after year if you don’t spend them, providing a long-term savings option for future healthcare costs. Moreover, after reaching the age of 65, you can withdraw the money for any purpose without penalty, although the withdrawal might be subject to income tax if not used for eligible medical expenses.
HSAs offer three major tax advantages—contributions are tax-deductible, the account earnings grow tax-free, and withdrawals for qualified medical expenses are also tax-free. These benefits make HSAs a powerful tool for both healthcare and retirement savings, helping individuals and families prepare financially for both expected and unexpected health-related expenses.
Navigating open enrollment can be tricky, but having an understanding of the key terms is a great place to start. With knowledge of these five terms, you can confidently make informed decisions about your healthcare coverage, ensuring you have the coverage you need without breaking the bank.
Don’t miss out on the opportunity to optimize your benefits and don’t be like the 48% of people who would rather walk on hot coals than update their benefits package during their open enrollment period1. Update your enrollment, review available health plans thoroughly, and secure your financial well-being for the future.
[1]: Aflac Open Enrollment Survey Workforce Report 2016
