It's Time to Consider Health Plan Re-Enrollments & Savings for 2016
The end of the year marks the time to enroll, re-enroll, or make changes to your health-care plans for the coming year. These plans include health insurance provided by your employer, health insurance you buy individually on the Health Insurance Marketplace (state or national), Medicare, and various tax-advantaged health savings plans. Take time now to consider what you and your family need for 2016. It can help you get the best coverage and benefits while saving money where possible.
Re-Enrollment for Employer Benefits
Even if you are satisfied with your current line-up of benefits from your employer, open enrollment is nothing to snooze through. Has your employer communicated changes in any benefits offered? Have your family's needs changed? How do these two considerations match up? Make sure you understand all communications from your employer related to health insurance, tax-advantaged savings plans, and other benefits, including retirement savings plans. A few hours spent analyzing and comparing your options may help you make the best decisions and save money, especially on health insurance and tax-advantaged health savings plans such as those discussed later in this report.
Medicare: Re-Enroll or Make Changes?
To make sure you are set for 2016, Medicare recipients must take advantage of Open Enrollment that runs from October 7 to December 15, 2015. During this period you can:
- Switch from original Medicare to an Advantage Plan or go from an Advantage plan back to original Medicare
- Switch between Advantage Plans
- Change Medicare Plan D programs (drug benefits programs) if you have original Medicare
- Sign up for a Plan D program for the first time. (A note: if you did not sign up for Plan D when first eligible, you may pay a slightly higher premium)
- Typically, you can usually sign up for or change a Medicare supplemental plan if you have original Medicare
If you did not sign up for Medicare when you were turned 65 and were first eligible, then you may sign up during open enrollment. Typically you will pay a slight penalty for late enrollment. If you will turn 65 during 2016, remember to sign up for Medicare during the 3 months before your birthday.
For Medicare, you can find information and take action at www.medicare.gov.
Open Enrollment in the Health Insurance Marketplace
Open enrollment for getting health insurance through the Health Insurance Marketplace opened November 1. During this time you can change plans or sign up for new coverage. If you want coverage to continue or start on January 1, 2016, you have until December 15, 2015 to sign up or make changes. If you have coverage for 2015, take time to compare options for 2016. Look especially at coverage provided by different plans and premiums charged.
If you want health insurance coverage to start by February 1, you have until January 15, 2016, to sign up on the Healthcare Marketplace. If you want coverage to start by March 1, you have until February 15, 2016, to sign up. But remember, the sooner you sign up, the better.
Enrollment for Tax-Advantaged Health Savings Plans
No matter what health insurance plan you have, not all costs are covered. If you have chosen a high-deductible health plan (HDHP) for its lower premium costs, then you will be paying greater costs out of your pocket by design. High deductible health plans are available from many employers and the Health Insurance Marketplace. In either case, you can realize greater savings by creating one of these tax-advantaged savings plans.
Contributions to the plans are made with pre-tax dollars from your income; then you use the savings to pay for allowable expenses, such as co-pays, certain over-the-counter medications, and other medical expenses. One of the following options may fit your circumstances.
Health Savings Accounts (HSAs)
Health Savings Accounts (HSAs) are tax-advantaged savings accounts for individuals who have high-deductible health plans (HDHP). You use the money in the HSA to pay covered health care expenses with pre-tax dollars. If you have an HDHP and provide your own insurance, you can set up an HSA at a licensed provider, such as a financial institution or insurance company. Employers offering HDHPs may also offer HSAs. You can use money in an HSA to cover co-pays and other qualified medical expenses. If you buy individual coverage under the Affordable Care Act, some plans may qualify as HDHPs.
Here's a big plus for HSAs: If you don't use all the money deposited in the HSA during the year, the leftover amount rolls over to the next year. Distributions used to pay qualified expenses are tax-free. If you use the money to pay for any unqualified expenses, you will have to play tax on that money plus a 20% penalty.
Other qualifications for a Health Savings Account include the following for 2016:
- To qualify as a high-deductible health plan (HDHP) in 2016, the plan for one individual must have minimum annual deductible in of $1,300 and a maximum annual amount (deductible + other out-of-pocket expenses) of $6,550. For a plan covering a family (one eligible individual and at least one other individual), the minimum annual deductible is $2,600 and the maximum annual amount is $13,100.
- In 2016, an individual can contribute a maximum of $3,350. For a family plan, the maximum contribution is $6,750
- You must not be covered under any other health coverage. There are exceptions such as dental insurance, vision care insurance or worker's compensation insurance.
- You cannot be enrolled in Medicare.
- You cannot be claimed as a dependent on someone else's tax return.
Health Flexible Spending Arrangements (Health FSAs)
A Health Flexible Spending Arrangement is a benefit plan offered by employers. It can be offered as part of a cafeteria plan. The plan allows you to save a set amount of your paycheck before taxes to help you pay for expected health care costs not reimbursed by your health insurance. You can have a Health FSA even if you do not have a high-deductible health plan (HDHP). The plan uses payroll deduction.
A properly designed FSA offers a way to save money by reducing taxable income and paying for all or a portion of out-of-pocket medical expenses with tax-free dollars. It can be used for such non-covered expenses as deductibles, co-pays, and uncovered services such as eyeglasses, dental care, or chiropractic treatments.
The employer determines the maximum amount you can set aside each year. The IRS for 2015 set a maximum limit of $2,550. This limit is expected to be the same for 2016, but your employer will have the latest information. Currently, individuals are also allowed to rollover a maximum of $500 of any unspent funds. Any amount remaining over $500 will be lost. So, it's important to carefully project what you expect to spend that will not be covered by your insurance.
After you estimate your annual needs, a proportional amount is deducted from each pay check. When you incur one of those anticipated unreimbursed health care expenses, you submit the claim and receipt/required documentation to your employer to reclaim those tax-free dollars to reimburse yourself.
Health Reimbursement Arrangements (HRAs)
A Health Reimbursement Arrangement is a benefit plan offered by employers which is funded solely by the employer. It cannot be created by a voluntary salary reduction. Employees covered by an HRA receive tax free reimbursement of qualified medical expenses up to a maximum dollar amount. An employer can offer an HRA along with other health plans, including FSAs. If your company offers an HRA, consult the Human Resources Department for the specifics of your company's plan.
For More Information
For Medicare, www.medicare.gov
For insurance under the Affordable Care Act from the Health Insurance Marketplace, www.healthcare.gov.
IRS Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans. The latest revision as of March 2015 is actually dated 2014 but provides informative information on tax-advantaged savings plans.