At open enrollment, one of the most daunting tasks can be deciding on the best health insurance plan option that meets your needs and the needs of your covered dependents. There are often many choices, and the language used although intended to be very clear, can actually be quite confusing. (We're here to eliminate that confusion...)
Before choosing a health insurance plan, be sure to ask questions, predetermine your health expenses and health care needs for the year ahead and research all of the variables of the plan options available to you.
A good place to start is the Summary of Benefits and Coverage, which should be provided to you prior to your open enrollment election and can provide the basic information you need to make the most informed choice possible.
While the variables of each plan offered can differ greatly, the basis of the plan designs are consistent. To help you prepare for the difficulties in choosing a health plan that makes the most sense for you, here are some of the basics for the various types of employer sponsored health plans that are offered.
[Note: This list does not include individually purchased health plan options or options available through the exchange.]
Commonly offered employer-sponsored health plan choices:
- Preferred provider organization plans (PPOs): PPOs allow individuals to use any of the plan's preferred providers within their extended network, including specialists, without the need for a referral. PPOs can vary in terms of out-of-pocket expenses, but they typically will require a copay for certain types of expenses and many may even require you to meet a deductible up front.
- Health maintenance organization plans (HMOs): HMOs allow covered individuals to use any provider within an extended network but require that individuals first choose a primary care physician (PCP) who will coordinate all of their extended care.
Once a PCP is chosen, covered individuals must see their them for referrals to certain specialists. Deductibles and copays may apply and will vary by plan design.
- Exclusive provider organization plans (EPOs): EPOs allow covered individuals to see any of the physicians within the assigned EPO network, typically without the need to assign a preferred provider or to obtain referrals. Often times EPOs will not provide any coverage for services rendered outside of the EPO network, so individuals must be certain to check the network of approved EPO providers before choosing this type of plan. Deductibles and co-pays may apply and will vary by plan design.
- Point-of-service (POS) plans : POS plans are a combination of the traditional HMO and PPO plan. You are typically free to see any provider within a large covered network and may be required to assign a primary care physician for regular office exams and wellness visits.
With POS plans, you are usually free to also use providers which may be out of the plan's network, and will often pay higher amounts for these services. Deductibles and copays may apply and will vary by plan design.
- High-deductible health plans (HDHPs): HDHPs can come in many forms, including PPOs, EPOs and HMOs. HDHPs are designed to incentivize covered individuals to make better choices in regard to their care.
By requiring individuals to meet a set dollar amount up front before their health insurance plans will cover certain expenses or all expenses, similar to the way in which you would meet a deductible with car insurance, HDHPs are intended to force the consumer to think about their medical needs and choices before receiving treatment, perhaps even shopping around for a better price. By having more “skin in the game," HDHPs are intended to create a more-informed consumer.
Qualified HDHPs can also be offered with health savings accounts (HSAs). In order for an HDHP to be HSA-qualified, the deductible requirement may be no less than $1,400 in 2020 for self-only coverage ($2,800 for family coverage). To be HSA-qualified in 2020, the maximum annual out-of-pocket costs cannot exceed $6,900 for self-only coverage ($13,800 for family coverage). Limits are increased for inflation each year.
- Employer-sponsored plans: When making your choices for the best health insurance plan to meet your needs, consider all options available to you. Many of the aforementioned plans will be offered with various types of employers sponsored plans, including flexible spending accounts (FSAs), health reimbursement arrangements (HRAs) and health savings accounts (HSAs). When making the choice that most closely meets your needs, don't forget to consider all options available to you.
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- I'm young and healthy … why would I want an FSA?
- Can I make mid-year changes to my FSA?
Open enrollment is your opportunity to make changes to your employee benefits elections and choose health coverage that will protect you and your loved ones for the year ahead. However, if your employer offers some type of health care or child care savings/spending account, you may be missing out on hundreds -- if not thousands -- in tax savings for expenses that you will incur over the course of the coming year.
Luckily, FSAstore.com/HSAstore.com is here to help you navigate the confusion of consumer-directed spending/savings accounts to find the plan that works for your needs. Here are four of the most common offerings:
|Flexible spending account (FSA) (also known as general medical FSA)|
|Yearly Contribution Limits||$2,750 per FSA (2020). If both spouses have an FSA through their respective employers, they could each elect the maximum for $5,500 per household.|
|Plan Year||Most often 1 year. In limited circumstances, there may be a short plan year.|
|Eligibility to Contribute||FSA plans can only be sponsored by employers and eligibility rules are set by each plan. Employees who work for employers who offer FSA plans may contribute up to the allowed maximum per year. Self-employed individuals and owners of certain types of corporations are not eligible for an FSA.|
|Account Ownership||An FSA account is owned and set up by the employer.|
|Access to Money||An employee's yearly FSA allocation is available in full on the first day of the plan year, regardless of contributions to date.|
|Change Contributions?||FSA users can only change their contributions during their Open Enrollment periods. Some plans also allow changes to contributions to be made if the account holder experiences a Qualifying Life Event, such as marriage, divorce, or birth of child.|
|Special Rules/Eligibility Exceptions||Employers can choose one of two (or none) options to provide relief for FSA users who would otherwise have to forfeit leftover funds: the $500 rollover and the 2.5 month grace period. The $500 rollover allows FSA users to move up to $500 of the previous plan year's contribution into next year's allocation (without counting against the overall contribution limit) to avoid forfeiting money to their employers at year end.|
The second is the FSA Grace Period, which gives users 2.5 months after the last day of their plan years to spend down their remaining FSA funds.
For more information about what an FSA can cover, visit the FSA Eligibility List.
|Health savings account (HSA)|
|Yearly Contribution Limits||$3,550 Individual, $7,100 Family (2020). Employee and employer contributions both count towards the limit.|
|Plan Year||There is no plan year with an HSA, funds rollover continuously each year and do not expire.|
|Eligibility to Contribute||An HSA can only be opened by a person enrolled in a qualified high-deductible health plan (HDHP) with a deductible of at least $1,400 (self-only coverage) or $2,800 (family-only coverage). The individual must not have other first dollar health insurance coverage, including an FSA. For calendar year 2020, a "high deductible health plan" is defined under § 223(c)(2)(A) as a health plan with an annual deductible that is not less than $1,400 for self-only coverage or $2,800 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,900 for self-only coverage or $13,800 for family coverage.|
|Account Ownership||An HSA is owned by the account holder and is a bank account set up in the owner's name. Account beneficiaries can be assigned.|
|Access to Money||Remaining HSA account funds can be accessed at any time regardless of whether or not the person is actively contributing to the HSA.|
|Change Contributions?||HSA users can change their contribution amount at any time, as long as it does not exceed the yearly allocation limit. It is up to the HSA account holder to track contributions and ensure they do not exceed the annual limit.|
|Special Rules/Eligibility Exceptions||Unlike FSAs, HSAs can cover the cost of certain premiums, but otherwise follow nearly identical eligibility requirements. For more information about what an HSA can cover, visit the HSA Eligibility List.|
|Limited care flexible spending account (LCFSA) (also known as limited purpose FSA)|
|Yearly Contribution Limits||$2,700 per FSA (2019). If both spouses have an FSA through their respective employers, they could each elect the maximum for $5,400 per household.|
|Plan Year||Most often 1 year. In limited circumstances there may be a short plan year.|
|Eligibility to Contribute||LCFSA plans can only be sponsored by employers and eligibility rules are set by each plan. Eligible employees may contribute up to the allowed maximum per year. Self-employed individuals and owners of certain types of corporations are not eligible for an LCFSA. However, unlike general medical FSAs, LCFSAs will usually only cover qualifying dental and vision expenses.|
|Account Ownership||An LCFSA account is owned and set up by the employer.|
|Access to Money||An employee's yearly LCFSA allocation is available in full on the first day of the plan year.|
|Change Contributions?||LCFSA users can only change their contributions during their Open Enrollment periods, or if the plan allows, if they experience a Qualifying Life Event (marriage, divorce, birth of child, etc.)|
|Special Rules/Eligibility Exceptions||An LCFSA typically does not qualify as "first-dollar" coverage, and therefore an account holder can open up both an LCFSA and an HSA if they so choose. Participating in both plans allows employee to maximize their savings and tax benefits.|
- A dependent under age 13.
- The taxpayer's spouse. If the spouse is physically or mentally incapable of caring for himself or herself, and has the same residence as the taxpayer for more than half of the year.
- A dependent of the taxpayer (i.e., a qualifying child or qualifying relative could be an older relative) must be physically or mentally incapable of caring for himself or herself, and have the same residence as the taxpayer for more than half of the year.
Which expenses are covered?
- Before- and after-school care.
- Adult care of a relative who spends at least eight hours a day at your home.
- Child care at a day camp, nursery school, or by a private sitter (or by a non-tax-dependent relative). Babysitters cannot also be claimed as dependents (an older relative must be at least 18 years old).
- Adult day care center.
- Transportation by caregivers.
- Expenses for a housekeeper who also handles dependent care.
- Day camps.
- Late pick-up fees.
Expenses not covered:
Any care that is not work-related will not be covered under your DCFSA.
- Overnight camps
- Long term care (nursing home)
- School tuition or education fees, meals or food.
For more information about what your DCFSA covers, visit our Eligibility List.
|Dependent care flexible spending account (DCFSA)|
|Yearly Contribution Limits||$2,500 individuals, $5,000 if filing taxes jointly. (2019)|
|Plan Year||Most often 1 year. In limited circumstances there may be a short plan year.|
|Eligibility to Contribute||DCFSA plans can only be sponsored by employers. Employees can open an DCFSA regardless health plan enrollment. DCFSAs let you use tax-free money to cover child care for qualifying children or adult dependent care for qualifying adults and relatives. You or your spouse must be working, searching for work, or attending school full-time in order to qualify for the DCFSA.|
|Account Ownership||A DCFSA account is owned and set up by the employer.|
|Access to Money||DCFSA funds are available as they accumulate within the account. Only expenses for services already incurred will qualify for reimbursement.|
|Change Contributions?||DCFSA users can only change their contributions during their Open Enrollment periods, or if they experience a Qualifying Life Event (marriage, divorce, birth of child, etc.)|
|Special Rules/Eligibility Exceptions|
- Internal Revenue Bulletin: 2019-22
- 2020 HSA Limits Rise Modestly, IRS Says
- 2019 FSA Contribution Limits Announced by IRS
More Open Enrollment articles
A timeline of tax-free health care
Flexible spending accounts (FSAs) and health savings accounts (HSAs) are currently the most popular consumer-directed, tax-free health care accounts in the U.S. today. The term "consumer-directed" refers to insurance plans that pay for common medical expenses like checkups and emergency care, but also contain a separate account to help you further reduce your out-of-pocket health care costs.