Every year, you get a chance to save yourself hundreds of dollars per year on your health insurance costs. But you only have a short time to make your move.
The 2021 open enrollment period is drawing to a close for individual health insurance plans and possibly for your employer-sponsored insurance too. If you have no idea what that is, you're not alone. Three in 10 Americans don't know what open enrollment is, according to a MetLife study, so here's a brief overview.
What is open enrollment?
Open enrollment is the annual period when anyone can make changes to their health insurance plan for the coming year. It's Nov. 1 to Dec. 15 for individual health insurance plans offered through Affordable Care Act marketplaces. Employer-sponsored plans have their own open enrollment periods, often in the fall, though they can be at any point during the year.
Outside of the open enrollment period, you can generally enroll in new health insurance only if you qualify for a special enrollment period due to things like getting married or divorced, having a child, or losing a job.
You typically don't have to make any changes to your plan unless you want to. If you don't cancel your old insurance, it'll automatically renew and the company will start billing you for the new premium amount when the new policy term starts. But it pays to explore your options. You may be able to find a different plan that offers similar coverage at a lower price. Even if you only save $8.33 per month, that's $100 more per year that you get to keep in your pocket.
How do I explore my insurance options?
If you get your health insurance through your employer, it should provide you with information about your options for next year during your open enrollment period. You can switch plans, keep your existing plan, or decline your employer's coverage altogether, though you'll usually pay a lot more to purchase your own policy.
If you want an individual plan through an ACA marketplace, you can create an account on HealthCare.gov and fill out an application to see what's available to you for 2021. Then, you'll receive an overview of each plan's coverage, premium, copay, and deductible. If you have a certain doctor you visit routinely or a prescription drug you take, you can enter these to see which plans cover them.
You'll need to estimate your household income for the year you're seeking coverage for in order to find out whether you'll qualify for a premium tax credit that reduces your monthly costs. Start with your adjusted gross income (AGI) from your most recent tax return and add any tax-exempt foreign income, tax-exempt interest, or Social Security benefits, but don't include Supplemental Security Income (SSI) if you're claiming this. Then, make changes based on how you think your income will change in 2021. If you're expecting a raise, for example, your income will likely be higher than what it was in years past.
You don't have to get it exactly right. Just don't put down a number you know is way off. It might save you a little bit on your premiums for a while, but the government's going to expect you to pay the rest of what you owe when you do your 2021 taxes.
What should I look for in a health insurance plan?
Cost is a big concern for most people shopping for health insurance, but it's not the only thing you need to keep in mind. An affordable plan that doesn't provide the coverage you need could end up costing you more if you end up in the hospital and have to pay for your treatment out of pocket. And with the pandemic likely to spill over into next year, this is a real concern you must keep in mind.
Make sure you're only looking at plans that cover your doctors and prescription drugs and pay attention to all costs associated with the plan. You can score a lower premium if you're willing to pay a higher deductible. If you do this, set aside the money you're saving on premiums every month until you've got enough to cover your deductible. A health savings account (HSA) is a great place to do this because money you put here reduces your taxable income this year. Plus, if you use it for medical expenses, you don't pay taxes on it at all. You can also use this money for retirement expenses if you don't need it for healthcare.
Again, you might decide to keep the plan you already have and that's totally fine. At least you'll know it's still the best option out there for you. If you do change plans, remember you'll still use your old insurance for a little while until your new policy takes effect, so don't throw away any of your insurance cards yet.