Open Enrollment Benefits: What to Know Before Choosing Your Health Care Plan

Despite being an annual event, open enrollment, or the period when you can select your health care coverage for the coming year, can be a confusing time. Between unclear terms and acronyms galore, you may be tempted to just stick with your current plan — especially if you haven’t had any major life or health changes.

But even if your personal situation hasn’t changed in the last year, critical factors of your health care plan may have, such as premium increases or certain doctors no longer being covered. So it's a good idea to review your options in full every year. To help ensure you’re making the best choice for both your family and your wallet, here are some common terms you may see relating to open enrollment benefits and what they actually mean.

Common health plan terms

While the specifics of a health plan may differ by provider, here are a few common terms you’re likely to come across that can help you determine how much you’re likely to pay for your health care.

Premium: The amount you pay (typically on a monthly basis) for coverage.
Deductible: The amount you need to pay out of pocket before your insurance starts covering costs.
Copay: A standard fee you may have to pay each time you go to the doctor or fill a prescription.
Coinsurance: Even after you reach your deductible, your plan may not cover your health care costs in full. The percentage that will be covered after you meet your deductible is called coinsurance. For example, if your coinsurance is 80 percent of a service, you would then be responsible for the remaining 20 percent.
Covered services: While certain preventative services must be covered by every health care plan, other services are at the discretion of your insurance company. Read these carefully before choosing a plan to avoid any unpleasant surprises.
Excluded services: A list of services that your plan won’t cover. Cosmetic procedures, weight-loss programs and long-term care often fall in this category.
Annual limits: Even if your health plan covers services like hospitalizations or prescriptions, they may set an annual cap on the dollar amount or on the number of times you can access the service.

Choosing a health care plan

Your employer may offer multiple health care plan options. While it’s impossible to know the full scope of your health care needs for the coming year, you can still base your choice on how much you’ve used your plan in the past, as well as how much you expect to use it, to determine the best fit for your needs and budget. Here’s what to know about three common plan types, along with considerations for each.

HMO (Health Maintenance Organization): With an HMO plan, you’ll choose a primary physician from a network of providers who are contracted with the plan. This assigned provider will be responsible for coordinating your care and referring you to specialists as needed.

Pros: HMO plans are typically more affordable, with lower premiums, copays and deductibles
Cons: You are limited to in-network providers, meaning you’ll be on the hook for most or all of any outside care you may receive. Also, some HMO plans are limited to a specific geographic area, so you’ll want to check that your coverage is convenient for where you live or work.

PPO (Preferred Provider Organization): Under a PPO plan, you can see providers inside or outside of your insurer’s network, but you’ll pay more if you choose to see a doctor or specialist outside of your network.

Pros: You have greater flexibility in choosing your own providers.
Cons: Your premiums will likely be higher than with an HMO plan.

HDHP (High-Deductible Health Plan): A HDHP is just what it sounds like — you can expect to pay a higher deductible, but typically pay a lower premium. With this type of plan, you will pay out of pocket for all your services (with the exception of preventative care) until you reach your deductible.

For 2022, a deductible of at least $1,400 for individuals and $2,800 for families is considered a high deductible. But even with an HDHP, out-of-pocket expenses (which include deductibles, copayments and coinsurance, but not premiums) cannot exceed $7,050 for individuals and $14,100 for families.

Many HDHPs are also accompanied by health savings accounts (HSAs), which allow you to contribute pre-tax dollars for qualified medical expenses. For 2022, the IRS will allow you to contribute up to $3,650 for individuals (with an additional $1,000 in catch-up contributions for those 55 and older) and $7,300 for families. While the money must be used for qualified medical expenses to avoid tax penalties, it is yours to keep, even if you switch jobs (although you can only contribute to it while you have an HDHP).

Pros: Low monthly premiums and tax benefits through an HSA
Cons: High deductibles mean you’ll need to pay a lump sum up front before your coverage kicks in