By Matthew Gaude & Shawn McGuire
It’s been a year unlike any other, and public health has been a constant theme in many of our lives. No matter how you’re currently coping with COVID-19, it’s important to consider that any sickness or disease could disrupt how you live your life, and most certainly your finances. How reliable is your medical insurance? If you’re hospitalized long-term, will you have enough personal savings to pay for what your insurance doesn’t cover? Could you honestly say that your family would be taken care of financially if you were out of work?
Questions like these are never easy to answer. However, they’re an important part of understanding how a major health event could affect your family. In the past, when your employer sent you open enrollment forms in the mail, you may have always chosen the same coverage you’ve had for years. But this year, we urge you to do things differently. As healthcare changes, you should use your open enrollment period to research different coverage and types of available insurance. This will allow you to make a more informed choice on your medical insurance and find ways to potentially maximize your coverage. Here are some ways you can take full advantage of your employer’s open enrollment period.
Ask About Supplemental or Voluntary Benefits
Even if you are already set up with medical coverage, it’s worth the effort to do a cost-benefit analysis on supplemental coverage. Many employers offer supplemental health insurance at affordable prices that can bridge the coverage gap that 44% of retirement plan participants have. (1) Supplemental insurance can take care of everything from hospital stays to accidents to disability coverage to cancer treatment. For example, some supplemental hospital insurance plans will provide you with a daily benefit amount paid directly to you and even cover the copays on a set number of doctor visits. In a trying situation, this cushion can ease your stress considerably.
Consider an HSA
If you are enrolled in a high-deductible health plan, you have access to a health savings account (HSA). An HSA allows you to make pre-tax contributions and tax-free withdrawals for qualified medical expenses, plus the added benefit of your funds growing tax-free. Many employers offer HSA contribution matches similar to a 401(k) and your funds roll over year to year, even if you switch jobs or no longer have a high-deductible health plan. And if you don’t end up using the money for day-to-day healthcare expenses, HSAs provide an efficient way to pay for healthcare in retirement. You can invest your HSA money in ETFs or mutual funds once you have a certain amount in your account, allowing you to build your own separate healthcare nest egg for retirement.
To qualify for an HSA, your 2022 plan must have a minimum deductible of $1,400 for self-only coverage or $2,800 for family coverage (the same minimums apply to 2021 plans). Before you sign up for this lower-premium plan, make sure you understand how the deductibles work, whether you have coinsurance or co-payments, and whether the coinsurance or copayments count toward your deductible.
You can use your health savings account to pay for a long list of out-of-pocket costs, from co-payments to contact lenses. For 2022, the HSA annual contribution limit for self-only coverage increases from $3,600 to $3,650. If you have family coverage, the limit jumps from $7,200 to $7,300 next year. If you’re 55 or older at the end of 2022, you can put in an extra $1,000 in “catch up” contributions.
For 2022 high-deductible plans, the maximum out-of-pocket cost is $7,050 for self-only coverage or $14,100 for family coverage. Keep in mind, though, that these plans are required to cover most of your preventive care, such as blood-pressure screenings, mammograms and immunizations, at no cost to you. They also may consider certain treatments connected to chronic care—for example, statins for high cholesterol and insulin for diabetes—as part of preventive treatment, meaning you can receive care at reduced or no cost without having met your deductible. (2)
FSA Account
Your employer may also offer a health care flexible spending account, which allows you to set aside pretax money for qualified out-of-pocket medical expenses. In 2021, you could contribute $2,750 in an FSA; 2022 limits have not been finalized.
HSA and FSA funds can also be used to purchase personal protection equipment, such as N-95 masks, hand sanitizer and self-diagnostic COVID-19 tests. You can also use HSA and FSA funds to buy over-the-counter medications to treat COVID-19 symptoms. (Note that you can’t have both an HSA and an FSA.)
Dental, Vision, Prescriptions
Once your medical needs are out of the way, don’t forget to check out your options for dental and vision care. Those are usually separate policies, with employers often offering two dental plan options and one vision plan. This year, don’t be too quick to sign up for the cheapest dental option, or skip the coverage altogether. Regular dental and vision screenings are important, because changes in eye, tooth and gum health can signal other medical problems. If the pandemic caused you to delay some of these appointments, your dentist or optometrist may find some problems that require immediate attention.
Evaluate Life Changes
Even though much is uncertain right now, what life changes do you hope to make next year? Will you be getting married? Adding to your family? If so, consider increasing your coverage on your group life insurance or adding coverage for your spouse. If your dentist has mentioned that you will need some work on your teeth soon, you may want to increase your HSA contributions or ask about supplemental dental insurance. Have you or someone in your family experienced some health issues? A different plan option might work better for you for the upcoming year.
Compare Your Coverage
Many companies make both minor and major changes in the benefits they offer from year to year. Take a look at last year’s details, compare them to this year’s updates, and determine what makes the most sense for you, not just financially, but also considering your life circumstances. Also, if there have been major changes and you are facing considerably higher costs, look into your spouse’s health plan. While it’s usually more cost-effective to obtain coverage through your employer, your spouse may have better coverage through their company.
How We Can Help
We have seen companies add new benefits as well as replace existing companies with new companies offering the same or similar benefit. This will normally require you to go through the enrollment process and re-select your original benefit.
I highly encourage you to send us your benefits documents so we can review and make sure you are taking advantage of everything that is available to you. We want to make sure you have the appropriate disability and life insurance in addition to what is usually provided by your company as well as reviewing any new benefits that may have been added to your plan.
The Takeaway
In the midst of what sometimes feels like a world gone mad, take some time to prioritize your employee benefits. Your company provides these as a thank-you for your hard work, so make sure you maximize them and use your open enrollment period to make decisions that align with your life.
And if you haven’t heard anything about open enrollment, reach out to the human resources department at your work to find out when it’s happening and if there is a scheduled meeting or webinar to highlight this year’s benefits. Remember, your HR department is there to walk you through these decisions and answer any questions.
At Live Oak Wealth Management, we are also here to help you navigate the details and make choices that work in tandem with the rest of your financial plan. Please don’t hesitate to call our office at 770-552-5968 or email [email protected]. Or, if you prefer, you can simply click here to schedule an appointment online.
About Matthew
Matthew Gaude is an *investment advisor representative and the co-founder of Live Oak Wealth Management, a financial services firm in Roswell, Georgia. He serves the planning and investment needs of corporate employees, those approaching or in retirement, and 401(k) plan sponsors. Working first as a commodity broker and then as a Business Development Manager for a national broker-dealer in previous jobs, he has the insight and experience to help clients understand the complexities of the market and implement strategies to minimize risk. To learn more about Matthew, connect with him on LinkedIn or visit www.liveoakwm.com.
About Shawn
Shawn McGuire is a financial advisor and the co-founder of Live Oak Wealth Management, a financial services firm in Roswell, Georgia. He serves the planning and investment needs of corporate employees, those approaching or in retirement, and 401(k) plan sponsors. He has worked in financial services since 2002 in positions ranging from financial advisor to stock broker and portfolio manager. As a CERTIFIED FINANCIAL PLANNER™ professional, he is trained to help clients with virtually all their financial needs. To learn more about Shawn, connect with him on LinkedIn or visit www.liveoakwm.com.
Securities offered through American Portfolios Financial Services, Inc., member FINRA/SIPC. Investment advisory services offered through *American Portfolio Advisors, Inc., a SEC Registered Investment Advisor. Live Oak Wealth Management, LLC is independently owned and not affiliated with APFS or APA.
Any opinions expressed in this forum are not the opinion or view of American Portfolios Financial Services, Inc. (APFS) or American Portfolios Advisors, Inc. (APA) and have not been reviewed by the firm for completeness or accuracy. These opinions are subject to change at any time without notice. Any comments or postings are provided for informational purposes only and do not constitute an offer or a recommendation to buy or sell securities or other financial instruments. Readers should conduct their own review and exercise judgment prior to investing. Investments are not guaranteed, involve risk, and may result in a loss of principal. Past performance does not guarantee future results. Investments are not suitable for all types of investors. Seek tax advice from a tax professional. Neither APFS nor its Representatives provide tax, legal or accounting advice.
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