Open Enrollment: Compare the Whole Year's Cost, Not Just the Premium

Doing nothing is still a choice

If you do nothing during open enrollment, many employers carry your current choices into next year. That feels safe, but the plan itself may have changed, and so may your life. Premiums, deductibles, and networks can shift from one year to the next, and your own health needs may be different too. The stakes are higher than they look because elections are generally locked in for the whole plan year. According to HealthCare.gov and IRS guidance, a qualifying life event, such as marriage, the birth of a child, or loss of other coverage, is generally the only way to change employer health coverage mid-year. If you pick wrong in the fall, you may live with it until the next window. Medicare's Annual Enrollment Period is open now, running October 15 to December 7 according to Medicare.gov. The takeaway for this issue is simple: compare the total yearly cost of each plan, not just the premium taken out of your paycheck, before your deadline.

Four numbers that decide your real cost

Every plan comparison comes down to four figures, and each one answers a different question. The premium is what comes out of your paycheck whether or not you see a doctor. The deductible is what you pay for covered care before the plan starts sharing costs. Copays and coinsurance are your share after that, either a flat fee per visit or a percentage of the bill. The out-of-pocket maximum is the ceiling: once your own covered spending reaches it, the plan pays covered in-network care in full for the rest of the year. Premiums are the cost you are certain to pay, while the other figures are costs you might pay. A low-premium plan with a high deductible is not cheaper, it simply moves the cost from your paycheck to the day you need care. Also check whether your doctors and your prescriptions are covered, because a great price on a plan that excludes them is no bargain.

A worked example: two plans, two kinds of year

Here is a hypothetical example, not real plan data. Plan A charges 100 dollars a month, has a 4,000 dollar deductible, and a 7,000 dollar out-of-pocket maximum. Plan B charges 250 dollars a month, with a 1,000 dollar deductible and a 4,500 dollar maximum. Assume both pay 80 percent after the deductible. Premiums for the year are 1,200 for A and 3,000 for B. In a quiet year with 500 dollars of care, you pay all of it under either deductible, so A costs 1,700 and B costs 3,500. Now suppose a hospital stay brings 20,000 dollars of covered care. On Plan A, you pay the 4,000 deductible plus 20 percent of the remaining 16,000, which is 3,200, for 7,200, but the maximum stops you at 7,000. Add premiums and A costs 8,200. On Plan B, 1,000 plus 20 percent of 19,000 is 4,800, capped at 4,500, so B costs 7,500. Plan A wins a quiet year and loses a bad one.

Where people lose money

The most common mistake is choosing on premium alone, which the example above shows can backfire in either direction. Close behind is assuming last year's plan still fits, when a new dependent, a new prescription, or a spouse's changed coverage has altered the math. A third mistake is ignoring the network: if your doctor is out of network, the deductible and maximum you were comparing may not apply to that care, and the bill can be far larger. People also overlook tax-favored accounts. IRS Publication 969 explains that health savings accounts require a qualifying high-deductible plan, and that FSA money is generally use-it-or-lose-it, with limited carryover rules described in IRS Notice 2013-71. Setting aside more in an FSA than you will spend means forfeiting your own pay. Finally, many people wait until the last day, then rush. Because elections are generally locked until the next plan year, a rushed choice can cost you twelve months. Check each of these before you submit.

How to check your own situation

Grab four things before you sit down: last year's benefits summary, this year's plan comparison from your employer, your last twelve months of medical statements, and your list of prescriptions. From the statements, total what you actually paid in copays, deductible, and coinsurance, and add the premiums withheld from your paycheck. That number is your baseline. Next, ask each plan the same questions. Are my doctors in network? Is each prescription covered, and at what tier? What are the deductible and out-of-pocket maximum for me alone versus my family? Is there an employer contribution to an HSA, and does the plan qualify for one? Then run the worked example above with your own figures: a quiet year, an average year, and a bad year. Check who is on the plan. A marriage, a birth, or loss of other coverage is a qualifying life event, so confirm your dependents and, if you are on Medicare, review the Plan Finder at Medicare.gov before December 7.

If you are on Medicare, your clock is different

Medicare has its own clock. The Annual Enrollment Period runs October 15 to December 7, according to Medicare.gov, and it is open now. During this window you can review your current coverage and switch plans for the coming year. Plans can change their premiums, drug lists, and provider networks from one year to the next, so the plan you chose last year may not be the best fit now. Start with the notice your plan sent you describing next year's changes, which you can compare to your current costs. Then open the Plan Finder on Medicare.gov, enter your actual prescriptions and your pharmacy, and compare the estimated total yearly cost of each option rather than the monthly premium. Confirm that your doctors are in the plan's network before you switch. Do this early, since the window closes December 7. Whether you are choosing workplace benefits or Medicare coverage, the habit is the same: price the whole year, then choose deliberately.

This newsletter is general education, not legal, tax, insurance or financial advice. The plan example uses hypothetical numbers for illustration only. Plan terms, tax rules and deadlines vary, so confirm details with your plan documents, your employer's benefits office, or Medicare.gov.