The 2020 open enrollment period for health insurance coverage and ancillary benefits has officially begun, running from Nov. 1 through Dec. 15 in most states. These three insights will ensure that you’re making the most of the open enrollment season, an excellent annual opportunity to secure your financial wellness both today and in the future.
1. Why Employee Benefits Matter
They’re called “benefits” for a reason and can be foundational elements of your overall financial life plan. You and your earning potential are your family’s greatest asset. From health insurance to disability coverage, benefits are critical to caring for you and your family both in good and potentially difficult times. Because employers have leverage and can negotiate better prices for employees, group benefits are generally more affordable than privately offered insurance. There are also tax benefits to group plans since many benefits are offered on a pre-tax basis, enabling you to save money through payroll deductions.
2. Knowing Is Half the Battle
Knowing what benefits are available is the first step. Step two is knowing which benefits are best for your situation and making the right elections. Benefit options can change from year to year, and the most significant changes typically occur to health insurance. This often represents the greatest cost as well, so take the time to review any changes and make the best selections. We consider the “big three” benefits to be health insurance, disability insurance, and life insurance, with each entailing its own important considerations:
- Health insurance: Consider whether a traditional plan would be a better option for you than a health savings account (HSA) eligible plan, which can be a great tool for younger individuals. For families, the HSA should be reviewed but may not be the best election, given plan costs and utilization. Also review pertinent details related to deductibles, out-of-pocket maximums, coinsurance, prescription drug coverage, and in-network versus out-of-network options for primary care physicians and specialists. Dental and vision coverage are also core elements of health insurance that should be explored.
- Disability insurance: This entails both short- and long-term considerations. Short-term disability coverage may not be necessary if you have an emergency fund. But if not, it can be an effective way to bridge the gap to long-term disability coverage. We consider long-term coverage to be more important than short-term because it offers protection against serious disability issues that can be devastating to financial lives. Investigate whether the disability coverage being offered provides at least 60% of your pay, and if a buy-up option is available otherwise. Also, check whether benefits that are paid are pre- or post-tax as this can have a significant impact on what you actually take home. Finally, make sure to coordinate group insurance with any private coverage you might have.
- Life insurance: Most firms offer basic life insurance coverage, which tends to be automatic, and voluntary group life coverage. The group option can be an inexpensive way to obtain this benefit but is subject to cost increases as you get older. For individuals and families needing life insurance, we typically recommend acquiring private coverage. You can commit to a specific level, generally more than what’s available through a limited group plan, and lock in your annual premium. That said, group coverage could be appealing to individuals who are less insurable due to health issues.
3. Consider Your Financial Plan
Besides providing an opportunity to explore health insurance and other benefits options, the open enrollment period represents a great time to review your overall financial plan. Protecting both your health and income should be fundamental priorities. Don’t assume that last year’s elections are still good enough, because your financial life may have changed (e.g., perhaps you got married or started a family) and you should adjust elections accordingly. Similarly, consider whether you can afford to start making a greater contribution to your 401(k) plan in conjunction with the open enrollment season.
It’s OK if you’re not sure where to start or are unclear on how open enrollment elections fit into your overall plan. Our financial lives are often complicated, and balancing your benefits with planning decisions outside of work can take time and expertise. That’s why we recommend talking to a CFP® Professional, who can serve as a trusted guide and provide you with the expertise and insight you deserve in all facets of your financial life.