Here’s something to pay attention to during benefits open enrollment season: Health insurance premiums may be stable but employees are getting socked with higher out-of-pocket costs including co-pays, co-insurance, and deductibles, leading to much higher overall out-of-pocket costs. That means it’s more important than ever to stay on top of ways to mitigate the damage.
“Employers are doing everything to try to reduce the total cost of coverage in order to keep from triggering the Cadillac tax in 2018,” says Amy Gordon, an employee benefits lawyer at McDermott, Will & Emery. She’s seen employers raise deductibles for an individual in 2016 from $2,500 to $3,000 and raise copays from $25 to $35 for an office visit and $30 to $50 for a specialist visit.
The average deductible for all covered workers in 2015 was $1,077, up 67% from $646 in 2010 and 255% from $303 in 2006, according to the Kaiser Family Foundation’s 2015 Employer Health Benefit Survey. Out-of-pocket dollar limits differ considerably—that’s one reason it can really pay to compare plans if your employer offers more than once choice, or if you’re married and can choose one spouse’s plan over the other. For example, among covered workers in plans that have an out-of-pocket maximum for single coverage, 13% are in plans with an annual out-of-pocket maximum of $6,000 or more, and just 9% are in plans with an out-of-pocket maximum of less than $1,500, according to the Kaiser report.
Here’s how to save money by making the right choices this open enrollment season:
Healthcare exchanges v. your employer plan. If you’re offered coverage from your employer and you decline it, you are not eligible for subsidies on the Obamacare exchanges. Still the exchange could be a better deal if your employer’s plan is expensive or not comprehensive.
Health savings account. More employers are offering the choice of a high deductible health plan—or making it the only choice. That means you can set up a health saving account: the money you contribute is tax-deductible (for someone in the 33% tax bracket, that’s like getting a third off on your healthcare expenditures right off); it grows tax-free; and you can withdraw it tax-free for out-of-pocket medical expenses. It’s possible to grow a $150,000-plus health savings account.
The family contribution limit for an HSA is $6,750 for 2016, up from $6,650 in 2015 (the contribution limit for an individual stays the same at $3,350). Starting the year you turn 55, you can put away another $1,000 a year.
The healthcare FSA. The 2016 contribution limit for a healthcare FSA is $2,550, the same as for 2015. Spouses can each set up an FSA, in effect getting a $5,100 break. (You don’t have to be enrolled in your employer’s health plan to set up an FSA). You contribute pre-tax dollars to the FSA and use it for out-of-pocket expenses. Check if your employer has put in the newish $500 carryover provision that lets you carry over $500 from one plan year to the next; if not, it’s still use-it-or-lose-it.
One big caveat: if you’re covered under a high-deductible health plan, you can only have a “limited purpose” FSA that you use for dental and vision expenses.
The dependent care FSA. Don’t confuse the rules for healthcare FSAs with dependent care FSA which is used to help pay for child care expenses. There’s a $5,000 limit per family (some employers have lower limits), and there’s no carry over provision. It’s safer to underestimate expenses because you can always take the dependent care tax credit on your income tax return (we explain why the credit is generally less valuable than the dependent care account here). Watch out for picky rules: Day camp counts but overnight camp doesn’t. And it’s not the year your kid turns 13, but the day he turns 13, that he becomes ineligible.
Wellnesss incentives. Taking advantage of employer wellness incentives can cut your costs or bring in cash. Quit smoking and get reduced premiums. Take a health risk questionnaire or biometric screening for blood pressure and cholesterol and get cash award of $50 to $500. Fewer than half of employees earned their full incentive amount in 2014. Some employers offer bigger awards: 44% of employers offer incentives of more than $500 for complying with medication regimens or participating in health coaching, according to Aon Hewitt.
401(k) elections. Don’t neglect a retirement savings check-up, especially this year, with big changes to 401(k)s on the horizon for 2016. Not all employers link 401(k) retirement plan elections—how much you’ll contribute for the upcoming year—to healthcare open enrollment. You could be shortchanging yourself on free employer matching money, or your employer could start automatically taking a higher percentage of your pay than your budget allows. Billions in 401(k) match dollars go unclaimed.
Transit benefits. Do you pay to park or for mass transit to get to work? More employees will see a new benefit, a federal tax break for commuting expenses that’s run through your workplace payroll that most large employers offer. New York and Washington, D.C. have new laws going into effect on Jan. 1, 2016 requiring employers with more than 20 full-time employees to offer the benefit. That means employees should see the sign-up information this fall; ask for it if it doesn’t come along with information on healthcare open enrollment, says Dan Neuberger, president of commuter services at WageWorks. The transit benefit lets you put pre-tax money into an account to pay for commuting expenses, so you save up to 40% (depending on your tax bracket). (The cap for parking is $255 a month for 2016, up from $250 in 2015; the cap for transit is $130 for now but could go up to $255 if Congress passes the tax extenders.) If your employer lets you make post-tax contributions in addition to pre-tax contributions, do so–that way you maximize the tax break you get if Congress extends it retroactively.
This article was written by Ashlea Ebeling from Forbes and was legally licensed through the NewsCred publisher network.
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