This post originally appeared on the Mint.com blog.
The last few months of the year usually mean time to think about choosing new health benefits. Some people think about Open Enrollment as an opportunity—it’s your chance to switch plans! But for most, it’s a looming headache: time to stress about choosing the right benefits.
It could be that there are just so many more options today than ever before. Several years ago, most employers just gave you a choice between a low-cost HMO and a more expensive PPO. Now the options have multiplied into an extended family of acronyms. To make things worse, employers and health insurance companies are pushing more costs onto consumers, so it’s even more important to make sure you’re getting your money’s worth.
As you approach your Open Enrollment period, here are 5 common mistakes, and how to avoid them.
1) Doing nothing
Almost 9 out of 10 of us just keep the same benefits we had last year. That’s not necessarily a problem, especially if you’ve done your research and your needs haven’t changed. Just make sure nothing substantial has changed about the plan either. Sometimes premiums increase or benefits get cut, and over time, the plan that was once a good deal may not be the best one for you anymore.
2) Shopping only by the premium
It’s easy to focus on how much health insurance will cost you each month because it’s a clear, predictable expense. But don’t overlook what you’re paying for or you may find yourself facing big costs later on, such as high deductibles or co-insurance.
It’s possible to have more insurance than you need. While good-for-you from a health perspective, this might not be that great from a financial perspective.
This doesn’t necessarily mean choosing the cheapest plan if you are a healthy individual—because we are all at risk for those unexpected medical events. But it might mean choosing a plan that has a more limited network, like an HMO if you are not seeing any specialists. Or choosing a high-deductible plan if most of your visits are routine preventive care.
Of course, you don’t want to go too far in the other direction choosing too minimal of a plan either. If you choose a high deductible plan, you should be able to pay the deductible at any time if needed. In an ideal world, you’d have lots of time to save up cash to cover your deductible in an HSA linked to the plan. But if you enroll in a high deductible plan, and suddenly have some medical bills before you’ve accumulated enough in your HSA, you could be in trouble.
5) Ignoring the savings accounts
FSAs (Flexible spending accounts) and HRAs (Health reimbursement accounts) pretty much mean free money on the table. But there are estimates that as few as 20% of people set up an FSA when it’s offered.
If you’re turned off by the idea of keeping receipts and faxing photocopies, give these savings accounts another chance. Now, most issue debit-like cards and many merchants are set up to automatically recognize FSA or HRA eligible expenses—so you can spend easily. You should still keep receipts as proof, and you might still need them for certain expenses. But the tax savings are well worth the work.