The time to purchase a new health insurance plan for 2016 is almost here, and there will be a lot of options to consider for year three of the state, federal and private marketplaces being in place.
Open enrollment begins November 1, 2015, and runs through January 31, 2016. In order to have coverage on January 1, 2016, enrollees must have their new plan selected and application submitted by December 15, 2015.
There are several things to consider in preparation for open enrollment. First, open enrollment isn’t just for people who don’t have health insurance. Every year every American who buys their own health insurance must shop for a new plan, or re-enroll in their existing plan. It is important for individuals to realize they have a choice, and shopping for a new health insurance plan each year can save them money – sometimes hundreds, if not thousands of dollars.
Understanding the most critical terms will help you discern what is most important for you and your family when shopping for a health insurance plan. For example, knowing what a deductible is, understanding coinsurance and looking at pharmacy benefits are critical before purchasing a plan. Here are some of the most critical facts you need to know:
Deductible: This is how much you have to pay out of pocket before your health insurance kicks in. More and more Americans have a high deductible, sometimes over $5,000, so it’s important that you can afford to pay up to your deductible amount if you need regular medical care. If you see a doctor several times a year, have a high chance of being hospitalized and take prescription drugs, it might be better to pay for a plan with a smaller deductible, which will lower your out of pocket cost overall.
Coinsurance: After you have had enough medical bills to meet your deductible, your health insurance company will begin paying for in-network care, but that doesn’t mean your healthcare is free. In most cases you will be responsible for coinsurance, which is a percentage of costs you are responsible for. If you have 80/20 coinsurance, your health insurance company will pay 80% of your medical bills after you have reached your deductible, and you are responsible for the remaining 20% of costs.
Pharmacy Benefits: If you take prescription drugs, review what your health insurance plan will cover. Every plan is different. Some plans have a combined medical and pharmacy benefit deductible, while many others have a separate deductible for prescription drugs. If the majority of your medical expenses are due to prescription drugs, get the lowest prescription drug deductible possible.
Subsidy: Many Americans qualify for cost assistance from the federal government when they apply for a health insurance plan. Even if you don’t believe you are eligible for a tax subsidy on your health insurance, run a quote and see if you qualify for any savings.
Penalty: If you don’t carry health insurance for three months or more, you are subject to a tax penalty that is payable at tax time to the IRS. In 2016 anyone who is not exempt from this provision will have to pay $695 per adult per household and $347.50 per child or 2.5% of total household income, whichever is greater.
The good news about purchasing health insurance is that you are not locked in to a long term commitment. If you have a life situation such as moving to a new ZIP code or having baby, you can change the type of health insurance coverage you have. Each year you have the opportunity to purchase a completely different plan. You can increase or decrease your benefits based on your financial or medical needs. It takes patience and time to re-enroll in health insurance coverage each year, but it gives you the control to pivot to a new plan if your lifestyle demands for a change, and save money.