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Open Enrollment Priorities

by Matt Jones, CPA
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With the chaos of work-from-home and related adjustments this year, it’s hard to believe healthcare open enrollment is right around the corner for most companies. This is your window, once each year, to take advantage of some easy financial wins through your employer. 

About half of all Americans get health insurance through their employer

Kaiser Family Foundation

Without a close review, you may be missing out on opportunities to secure finances and perhaps even improve them. Unfortunately, most of us don’t understand these benefits, and so we choose to ignore them… here’s a simple priority list for approaching open enrollment.

It’s important to note that all of my thoughts below are related to group policies through your company. The advantage of your employer’s program is collective buying power for better rates and more favorable terms. If you are offered an individual policy, it’s an entirely different conversation. Again, if you have any questions about your company’s specific policies, ask the experts in your Human Resources department.

Open enrollment priorities related to your financial security

1. Health insurance (avoid bankruptcy)

Earlier this year I had nearly $40,000 in medical bills related to my surgery before the cost of follow-up visits and physical therapy. Because I had health insurance through my employer, I didn’t have to shoulder this burden on my own. With my HSA account, I ended up paying close to $4,000 out of pocket. I saved about $36,000 (and potential bankruptcy) by paying a few hundred dollars each month for health insurance. 1 This is why health insurance is number one on the list of open enrollment priorities.

Most employees don’t realize most companies cover 50-70% of the cost of health insurance premiums. Typically, employer plans are more generous than what you could find on your own for the same price. 2 When you consider that health plan premiums can easily cost $5,000-10,000 per year, having half of more of this cost covered by your employer is a significant, if not overlooked, financial saving. 

2. Disability (protect your paycheck)

Health insurance helps protect what you have from bankruptcy due to medical bills. Disability insurance – long and short – protects your paycheck by replacing part of your income if you’re unable to work. Everyone understands the logic behind life insurance. It’s certainly a good thing to have, but you’re more likely to utilize disability insurance during your working years than life insurance.

Some employers provide disability insurance to employees at no cost while others may share part of the cost. Even if your employer doesn’t contribute anything toward your disability coverage, it might be worth enrolling since the cost is typically much higher on your own for less coverage.

3. Life insurance (protect your loved ones)

The irony of life insurance is that even though it’s your policy, it isn’t for your benefit. Life insurance takes care of your loved ones if something happens to you. Typically, as you get older you have more obligations like your children, tuition, and mortgages. You’d pay for these things over the years, but if you have an untimely death you won’t be earning income to cover these costs.

The value of life insurance makes sense, even if it isn’t pleasant to talk about. How much and which type is beyond the scope of this article. But it’s likely that buying through your employer if they offer it is the most affordable option you have.

4. Retirement plan (protect your golden years)

Investing is the main focus of this website, but I won’t spend a lot of time on it here. Simply put, if your employer contributes to a retirement plan (often matching your contributions) it can provide you with some of the best investment “returns” around. Up to a 100% “return” if they fully match your contribution. If you can afford this on top of the prior benefits, it’s wise to take advantage. 

Use your budget to answer the following questions: Can you afford the monthly premiums? Can you afford to invest on top of paying for health insurance? What stage of life are you in? There are many questions to take into consideration. Talk with your plan provider, human resources department and someone you trust like your family and/or friends. 

Don’t have a budget? Use my budget tool to get started and determine which of these important benefits you can afford.

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