Workers who have access to group health insurance through an employer may see more virtual tools and services to help them evaluate and select a plan—especially if they’re working remotely. Those who are newly unemployed or self-employed may find themselves navigating the individual health insurance market for the first time.
Coverage through your job
Large employers expect health care expenses, including insurance premiums and out-of-pocket costs, to rise by 5.3% in 2021, for a total of about $15,500 spent on each worker for the year (including contributions from both the employer and employee), according to a survey from the Business Group on Health. But because COVID-19 has caused delays in preventive and elective care in 2020, expenses could run higher than expected in 2021 as employees catch up on missed appointments and procedures. In 2020, employers estimate that expenses per employee will total $14,769, with employers contributing $10,202 to employees’ premiums and health accounts (such as a health savings account) and employees contributing $4,567.
The use of telehealth services, which was already rising before the coronavirus struck, has shot through the roof in 2020 as shutdowns kept people home in the spring and social distancing became the norm. With telehealth, a patient may consult with physicians via video chat or on the phone rather than visit a clinic or hospital. Although telehealth services are still commonly used for minor but somewhat urgent consultations—say, to diagnose and prescribe treatment for a rash—they’re increasingly offered for needs ranging from diabetes management to physical therapy. Virtual health visits aren’t appropriate for many medical problems, but a recent study published in Annals of Internal Medicine shows that 70% of virtual health visits were satisfactory replacements for in-person consultations. In 2019, the median employer plan co-payment for a telehealth visit was $30, and 20% of employer plans didn’t charge at all for telehealth services, according to benefits-consulting firm Mercer.
The pandemic is also prompting more emphasis on certain types of care. Besides the physical ailments that a COVID-19 infection causes, employers and insurers are considering how stress and anxiety invoked by the pandemic are affecting mental health. Among large employers, 36% say that expanding access to mental health services is a priority in 2021, according to the Business Group on Health. Employees are gaining greater access to virtual mental health services, and some companies are offering clinics and mental health therapists at the office.
As many workers continue to telecommute this fall, offices are incorporating more digital methods to spread the word about benefit options. Rather than hold in-person meetings to introduce employees to the menu of insurance benefits, more employers will host webinars, post prerecorded online video presentations or send out documents outlining benefit choices, says James Bernstein, a partner at Mercer.
Taking it a step further, some employers are hosting virtual benefits and health fairs, replicating events typically held at the office. Employees may, for example, visit a website on which they can click through various online “booths” to learn about the resources available to them, says Bernstein. Employers are even finding new ways to administer flu shots—for example, by holding drive-through clinics so employees can receive vaccinations from inside their vehicles, says Ellen Kelsay, president and CEO of the Business Group on Health.
Compare employer plans. Continuing a trend from the past few years, employers are adding more types of health plans to their benefit choices. For 2021, just 22% of large employers will offer a high-deductible health plan as the only option for employees, down from 25% in 2020, 30% in 2019 and 39% in 2018, according to the Business Group on Health. And particularly during a pandemic, “there’s a real recognition that health benefits are as important, if not more important, than they’ve ever been. I think there’s a bit of reassurance that while there are some distressed industries, the vast majority of employees will not see reductions in benefits,” says Julie Stone, managing director of health and benefits for consultant Willis Towers Watson.
If you have multiple plans to choose from, do your homework to help ensure that you pick the best one for your health needs at the lowest cost. Even if you’re happy with the plan you have, review your options in case any features have changed. Your employer may provide a calculator that compares premiums and out-of-pocket costs for various plans based on your expected health care needs throughout the year.
For policyholders who are healthy, a high-deductible health plan—often paired with a health savings account, or HSA—may be a smart choice because premiums typically run lower than those for other types of plans. For 2021, a health plan must have a deductible of at least $1,400 for self-only coverage or $2,800 for family coverage for the policyholder to be eligible to contribute to an HSA (the same minimums apply to 2020 plans). HSAs come with a trio of tax benefits: Contributions are pretax (or tax-deductible for HSAs that are not employer-sponsored), money in the account grows tax-deferred, and withdrawals are tax-free for qualified medical expenses. Plus, employers often subsidize contributions to an HSA.
Keep in mind that even before you reach the deductible, comprehensive plans must fully cover specified types of preventive care, including blood pressure screenings, immunizations and certain forms of prenatal care. Insurers may also pay for testing and treatment related to COVID-19—including any coronavirus vaccine that may become available—before you meet the deductible as well as for certain drugs to manage chronic conditions, such as insulin for diabetes and statins for heart disease. And in response to the pandemic, high-deductible policies that have plan years starting on or before December 31, 2021, are permitted to cover telehealth services pre-deductible.
Another option your employer may present is a traditional preferred provider organization (PPO) plan, which usually comes with a lower deductible and higher premium. A PPO may make sense if you frequently seek care for a health condition. PPOs typically cover care even for out-of-network providers to some degree. Alternatively, a health maintenance organization (HMO) plan usually comes with a lower premium and deductible than a PPO but provides little or no coverage for out-of-network care, and you may need a referral from your primary care doctor to get coverage for specialist visits.
The fine print. As you peruse plans, review some other key factors. You may have co-payments of a fixed amount for various services—say, $20 each time you see your primary care doctor. Or your plan may have a coinsurance structure, requiring you to pay a certain portion of the cost of each visit—for example, with you paying 20% and the insurer covering 80% after you reach the deductible. Take a look at your annual out-of-pocket maximum cost; by adding that figure to the total amount you’ll spend on premiums for the year, you’ll have a good idea of the most you’d have to pay for health care in 2021.
Find out how prescription drugs are covered. On the plan’s formulary, you’ll see which drugs are included. Typically, coverage is split into categories, with generic drugs requiring the lowest co-payment from you. Co-payments for nonpreferred, brand-name drugs are usually higher, and some drugs may not have insurance coverage.
If dental and vision plans are on the table, decide whether the premium is worth paying. If you and your family members don’t wear glasses or contacts—or if your premium payments will exceed the amount you expect to spend on exams and corrective lenses—then you can probably take a pass on vision insurance. If you’re considering dental insurance because you expect a family member to need braces soon, make sure you understand the fine print. Insurers may, for example, require orthodontics to be medically necessary to provide coverage, says Brian Haney, founder and vice president of financial-services firm The Haney Company. And keep in mind that pediatric dental and vision coverage for kids is often included in core medical policies, so your children may not need coverage outside your standard health insurance plan, says Haney.
Take advantage of HSAs and FSAs
Your employer may offer a health care flexible spending account, which allows you to set aside up to $2,750 a year for 2020 in pretax money for qualifying out-of-pocket medical expenses, from bandages to eyeglasses to sunscreen. (For a list of eligible items, go to www.fsastore.com/fsa-eligibility-list.aspx.) And as of January 1, 2020, over-the-counter drugs such as pain relievers, cough suppressants and antihistamines are FSA- and HSA-eligible without a prescription, as are feminine hygiene products such as tampons and pads. (For more, see HSAs Get Even Better.)
You have until the end of your plan year to use up the funds in your FSA, or March 15 of the following year if your employer offers a grace period. As an alternative, your employer may allow you to roll over some of the unused balance to the following plan year. The IRS recently increased the amount employers can permit workers to carry over from 2020 plans from $500 to $550. That may be especially helpful if you postponed medical procedures in 2020 because of coronavirus-related closures.
Leverage an HSA. HSAs are available with high-deductible policies both through employer group plans and in the individual market. Besides a triple tax benefit, they come with another big perk: The money you contribute is yours forever—no use-it-or-lose-it rule applies. For that reason, an HSA can be a smart way to save for future medical expenses in retirement. You can contribute to an HSA only if you have a qualifying high-deductible health plan; Medicare enrollees can’t put money into to an HSA, but they can use funds from accounts they opened previously.
Keep in mind that you can contribute to your HSA for the current plan year until tax day the following year. You can make 2020 contributions to an HSA, for example, until April 15, 2021. For 2020, you can put a maximum $3,550 in an HSA for self-only coverage or $7,100 for family coverage. For 2021, the limits are $3,600 for self-only plans or $7,200 for a family. For both 2020 and 2021, those 55 or older by the end of the year can contribute an additional $1,000.
Some employers have programs through which the company contributes to the HSAs of employees who, for example, participate in wellness coaching or some other health-improvement service. Increasingly, however, employers are shifting away from such incentive-based programs, according to the Business Group on Health. Instead, the company may make a predetermined contribution into every employee’s account. Large employers are making a median $600 contribution into the HSAs of employees with self-only coverage in 2021.
Navigating the individual market
Generally, employer-sponsored health plans give you the most bang for your buck. But if you’re self-employed or between jobs, the individual marketplace is your main alternative, unless you use COBRA (through which you may extend employer health benefits after leaving a job, though you’ll be required to pay both the employer and employee share of the premium), jump on a spouse’s or parent’s employer plan, or qualify for Medicaid.
After Diane Pearson left a larger company to start her own financial-planning firm, she delved into the individual market for the first time last year to purchase a plan for 2020. Her husband, Alex, is a self-employed carpenter, and so is their 25-year-old son, David, who lives with his parents. With the help of an insurance broker, the Pearsons selected a high-deductible policy to cover the three of them. “We are relatively healthy and knew we probably wouldn’t need health care other than for routine exams and checkups,” says Diane. They’re also contributing to an HSA. “As a financial adviser, I’ve been leaning more toward recommending the HSA as the best savings option for retirement that anybody could have right now.”
During open enrollment this fall—which runs from November 1 through December 15 for the HealthCare.gov marketplace—the Pearsons intend to choose a high-deductible plan for 2021. But they have a couple of new considerations. When the Pearsons were selecting their 2020 policy, a representative of their primary care physician’s office said that it accepted insurance from the company the family chose. However, “I found out later there were multiple insurance lines that that company wrote, and our primary care doctor didn’t take the one that we picked,” Diane says. For 2021, she hopes to find a plan that provides coverage for her family physician’s office. “I’ve been with them for 30 years. It’s not something I want to change,” she says.
Plus, David will turn 26 midway through 2021. After the month of his birthday, he’ll be ineligible to stay on his parents’ policy. “I want to have the discussion now to make sure he’s not skipping a beat” for coverage next year, says Diane. (Children who age off their parents’ employer policy are eligible for COBRA.)
Exploring the health care exchange. At www.healthcare.gov/get-coverage, select your state from the drop-down menu. If your state runs its own health care exchange, you’ll be directed to it. Otherwise, you’ll pick a policy through HealthCare.gov, which provides plans that are compliant with the Affordable Care Act.
If your income is between 100% and 400% of the federal poverty level, you will be eligible for a tax credit that reduces your policy’s premium. (Note that you must purchase a plan through the exchange to receive the savings—you can’t go directly through insurance companies or otherwise stray from the exchange.) In most states, you can qualify for a subsidy for a 2021 plan if you have an income as high as $51,040 for an individual, $68,960 for a family of two or $104,800 for a family of four (the maximums are higher in Alaska and Hawaii).
Plans on the exchange are broken into bronze, silver, gold and platinum categories. Bronze policies generally offer the highest deductibles and lowest premiums; platinum policies provide the most robust coverage in exchange for higher premiums; and silver and gold policies fall in the middle.
If you’re healthy and looking for a stopgap to get by for a few months, short-term health plans that are available outside the exchange may be worth a look. They usually have considerably lower premiums than comprehensive plans, but short-term plans are not compliant with the Affordable Care Act. That means they often don’t cover maternity and mental-health care and, significantly, exclude coverage for preexisting conditions—and insurers may use a broad definition of what a preexisting condition is. “If you had a headache two years ago that was documented and then you have an aneurysm, the insurer is not going to cover treatment” if it’s not an ACA-compliant plan, says Heather Stone, a health insurance broker in Fort Myers, Fla.
A health insurance agent or broker can help you sift through the options in the individual market. Find one in your area at www.nahu.org.
Save money on prescriptions
Even with health insurance, you may have to pay at least part of the cost of your prescription drugs. Generic drugs usually require smaller out-of-pocket outlays than brand-name pharmaceuticals. Ask your doctor about generic options or, if none are available, for alternative treatments that have the same effect as your current medications but that cost less or have a smaller co-payment. Check whether you can save money by using a preferred pharmacy or receiving your prescriptions through the mail.
Coupons can help defray drug costs, too. At GoodRx.com, type in the name of your medication to search for coupons and compare prices at various pharmacies. You may also be able to get coupons from your doctor or at the drug manufacturer’s website. If your income falls below certain levels or if you’ve spent more than a specified portion of your income on drug costs, you may qualify for a pharmacy assistance program. You can learn more about the programs at www.needymeds.org.
Shop for a Medicare plan
With a pandemic, a struggling economy and some big changes to the Medicare program in 2020, even seasoned Medicare beneficiaries have plenty to consider during Medicare’s annual open enrollment, from October 15 to December 7. During this time, existing beneficiaries can change plans for coverage beginning January 1. This includes switching from traditional, government-run Medicare to an all-in-one Medicare Advantage plan administered by a private insurer (or vice versa), changing an Advantage plan, switching or adding prescription drug coverage through a stand-alone plan, and adding or dropping drug coverage for an Advantage plan. You can switch medigap plans, which provide supplemental coverage for traditional Medicare, at any time if the new insurer accepts you.
Those enrolled in an Advantage plan also have between January 1 and March 31 each year to choose a different Advantage plan, return to traditional Medicare or change prescription drug coverage. Your new plan takes effect the month after you sign up for it.
If you miss your initial enrollment for Medicare at age 65, you can sign up for Part A, which covers inpatient care at a hospital or skilled nursing facility, anytime. But for Part B, which pays for physician services, diagnostic tests, physical therapy and other outpatient care, you will have to wait until the January-through-March period to enroll.
The standard monthly premium for Medicare Part B is projected to rise to $148.50 in 2021, up from $144.60 this year. That base premium gradually increases depending on income because of Medicare surcharges, also known as income-related monthly adjustment amounts, or IRMAAs. Rates and income thresholds for Part B are set by the federal government and are typically announced toward the end of the year for the following year. Over the summer, Republicans called for freezing 2021 premiums at 2020 levels in their economic stimulus bill. But the freeze is no freebie; beneficiaries must repay any shortfall from the premium freeze with monthly surcharges averaging $3.
Siskos is an old hat with the Kiplinger brand. More than a decade ago, she spent eight years writing about personal finance for Kiplinger's Personal Finance magazine, including a monthly column—Starting Out—that served young adults. That was in her salad days. Now she's turned her attention to an audience she hopes to join in a decade or so: retirees. Siskos is the managing editor for Kiplinger's Retirement Report. In between, she broadened her personal-finance repertoire with real estate and investing stories at Old-House Journal, Investing Daily and U.S. News. She comes to Kiplinger by way of the Newseum, where she worked as an exhibit editor.
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