The ABCs of Open Enrollment
Open Enrollment, the time of year when employees can stop, start, or change their health insurance for any reason, can be frustrating. Given the fact that employees only have a short window to enroll in benefits, it’s extremely important to understand as much as possible before committing to an insurance plan. One of the most frustrating aspects of open enrollment is the fact that insurance companies use abbreviations that are often not clearly explained. To help with that, we’ve provided a short guide to clear up any confusion and help you make the right choices for yourself and your family.
PPO
The abbreviation PPO stands for “Paid Provider Organization”. This is a network of doctors and other healthcare providers that offer services at a discount. If you see a doctor outside the PPO network, you’ll have a significant cost, so if there is a doctor you want to see, double-check to make sure they’re included in the PPO plan.
HMO
HMO stands for “Health Maintenance Organization”. Like PPOs, HMOs have a network of providers, but unlike a PPO, they won’t pay for other providers unless you have a referral. HMOs are generally less expensive than PPOs, but if you’re going to use them, make sure you understand what to do if you need a referral.
HDHP
An HDHP, or High Deductible Health Plan, has a deductible of at least $1400 for an individual or $2800 for a family. This deductible must be met before any medical services are covered. HDHPs are less expensive than other plans, so if you don’t anticipate needing to see a doctor often, they might be a good choice for you. If you choose to enroll in an HDHP, you can also use an HSA to offset unexpected healthcare costs.
HSA
An HSA is a Healthcare Savings Account, and it’s meant for people who have an HDHP. If you have an HSA, you’ll have money deducted from your pay set aside in a separate account for healthcare costs. An individual can have up to $3650 held in an HSA plan, and a family can have up to $7300. If you’re over 55, you can contribute an additional $1000 annually as a “catch up” contribution. Money contributed to an HSA will roll over from year-to-year, so you should maximize your contributions. HSAs cover most qualified medical costs, but for detailed information, click here.
In to be eligible for an HSA, you must be enrolled in an HDHP plan, you must not be covered by any other insurance, such as Medicare or by a spouse’s plan. Additionally, you can’t be claimed as a dependent on anyone’s taxes. An HSA account can’t be used to cover your insurance premiums and it may not be combined with an FSA.
FSA
The term FSA stands for Flexible Spending Account, and like an HSA, it’s funded by pre-tax deductions from your payroll. An FSA can be used to cover most healthcare costs other than premiums, but it can’t be used by anyone who has an HSA account. Unlike an HSA, the funds in an FSA are only used for the current calendar year, although your employer may choose to grant a grace period of 2.5 months into the following year. Employers may also choose to allow rollovers of up to $500 from year to year, however, neither the grace period nor the rollover is required under the law. Any funds left in the account after the end of the year, grace period, or rollover default back to the plan.
Contributions to an FSA are limited to $2750 per year. If you’re married, the funds can be used to cover the expenses of your spouse, who may also enroll in an FSA with their employer, but you can’t be reimbursed by both FSA plans for the same expense.
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