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Commonly Asked Employee Open Enrollment Questions and How to Answer

Despite the best efforts of HR professionals everywhere, many employees simply don’t know as much about their benefits as they should.

Surveys of American workers continuously find that they do not understand the benefits they sign up for, do not devote much time to assessing their benefit options, and that benefits literacy may actually be getting worse as time goes on. This is why it's so important for employer organizations to proactively work to close this health and financial literacy gap within their employee populations.

In the spirit of making sure that your employees are as informed and prepared as possible, here’s a handy guide to some of the most common open enrollment questions that employers receive each year:

What is the difference between a PPO and an HDHP?

A PPO refers to the network structure of a plan, whereas HDHP refers to its pay structure. An HDHP can be a PPO (or an HMO, POS, or EPO). A high deductible health plan (HDHP), sometimes referred to as an HSA plan, simply works differently than more traditional plans in that there are no copays. With an HDHP, you will pay everything out-of-pocket until you reach your deductible. After that, the plans coinsurance kicks-in, and the insurer picks up a percentage of the bills until you reach your out-of-pocket maximum.

Note, the HSA, or health savings account, is an actual bank account that is an optional part of the HDHP. The HDHP is a high deductible health plan that is a specific plan design that makes it compatible and in compliance with IRS rules to allow you to open and contribute to a health savings account. The main compatibility requirement of an HDHP that allows for HSA bank account contributions is there is no first dollar coverage, such as copays. The only first dollar coverage on an HDHP plan is preventive care as defined by HHS, such as well woman exams, physicals, and childhood immunizations (grandfathered plans do not have the preventive coverage).

What’s an embedded deductible?

The term ‘embedded deductible’ means that an individual doesn’t have to meet the family deductible in order for coinsurance to kick in. Once a person covered under a family plan reaches the individual deductible, all covered expenses for that individual will be paid at the coinsurance amount even when the family deductible has not been satisfied. Once another person or a combination of persons meet the remaining portion, the family deductible would be considered satisfied.

Generally, traditional copay plans are embedded deductibles. Some HDHP plans will be embedded while lower cost HDHP plans may not be.

What’s an embedded out-of-pocket maximum?

An embedded out-of-pocket maximum works in the same way an embedded deductible works. Once a person covered under a family plan reaches the individual out-of-pocket maximum, all covered expenses for that individual will be paid at 100% even when the family out-of-pocket maximum has not been satisfied. Once another person or a combination of persons meet the remaining portion, the family out-of-pocket maximum would be considered satisfied.

What is a coinsurance?

Coinsurance is the amount of a claim or a bill that you must pay after you’ve met your deductible; it’s your share of the cost of a healthcare service (the insurance company pays the rest). So, if a plan has 20% coinsurance, you will be responsible for 20% of any bill and the health insurance company will pay the other 80%. Your coinsurance doesn’t kick in until the deductible is met. Put simply, coinsurance is a shared paid amount between the insured person and the insurance company.

What’s the Difference Between a Deductible and an Out-of-Pocket Maximum?

  • Deductible: the amount you must pay before your health plan starts to pay benefits. This doesn’t include services covered by a copay or covered in full before the deductible, such as preventive care on all non-grandfathered health plans.
  • Out-of-pocket maximum: the total amount you must pay during the plan year for all in-network treatment covered by your plan, including the deductible, copays and coinsurance.

What’s the difference between my deductible and premium?

Your deductible is how much you pay for medical care before your insurance kicks in. If you have a $1,000 deductible, you will have to spend $1,000 of your own money until your insurance starts footing the bill. Your premium is the monthly membership fee you pay in exchange for health coverage.

Usually, if your plan has a higher deductible, your premium is lower. And if your plan has a lower deductible, your premium will probably be higher.

What's the Difference Between an FSA and HSA?

The most significant difference between flexible spending accounts (FSA) and health savings accounts (HSA) is that an individual controls an HSA and allows contributions to roll over, while FSAs are less flexible and are owned by an employer. The FSA is generally “Use it lose it.” FSAs do have some carryover provisions but are generally must more prohibitive than an HSA. This means that if you left your job, your FSA funds might be forfeited while any funds in your HSA are yours to keep. Both FSAs and HSAs allow people to save for their medical expenses on a tax-advantaged basis by using pre-tax money to pay for qualified medical costs.

How much can I contribute to my HSA?

The IRS has released 2024 inflation-adjusted contributions for HSAs, which can be viewed here. For calendar year 2024, the annual limitation on deductions under Code Section 223(b)(2)(A) for an individual with self-only coverage under a HDHP is $4,150, up $300 from the 2023 figure. For individuals with family coverage under a HDHP, the limit is $8,300, up $550 from 2023. There is no change to the HSA catch-up contribution limit for individuals 55 and older. These amounts are set and adjusted annually by the IRS. Remember that not all health plans with a high deductible are HSA-qualified, so before you enroll in a plan, make sure this tax benefit is included.

What happens to the money in my HSA after I turn age 65?

You can continue to use your account tax-free for out-of-pocket health expenses. When you enroll in Medicare, you can use your account to pay Medicare premiums, deductibles, copays, and coinsurance under any part of Medicare. If you have retiree health benefits through your former employer, you can also use your account to pay for your share of retiree medical insurance premiums. The one expense you cannot use your account for is to purchase a Medicare supplemental insurance or “Medigap” policy. Once you turn age 65, you can also use your account to pay for things other than medical expenses. If used for other expenses, the amount withdrawn will be taxable as income but will not be subject to any other penalties. Individuals under age 65 who use their accounts for non-medical expenses must pay income tax and a 20% penalty on the amount withdrawn.

Do I lose the money in my HSA if I don’t use it during the year?

No, that money is yours and rolls over from year to year. It’s different from a flex spending account, which is a “use or lose it” account.

Can I purchase my own health insurance and have my employer reimburse the premiums?

This question is more likely to arise now that the federal government has made headlines by expanding health reimbursement arrangements (HRAs) that can reimburse employees for individual market health insurance. This will depend on whether your employer has decided to offer one of these reimbursement arrangements.

How do I make sure my preventive care visit is 100% covered?

If your health insurance plan is ACA-compliant, it should be covered completely. All preventative care visits must be covered by insurance, free of charge, regardless of whether you’ve met your deductible.

Before you see the doctor, check to make sure the type of visit you’re going in for is covered under preventive care according to the ACA.

What is a Qualifying Life Event (QLE)?

Qualifying Life Events allow you to make changes to your insurance plan within a set period of time (usually 30 or 31 days), regardless of if they occur during the open enrollment window or not. Common QLEs include, but are not limited to the following:

  • Marriage, divorce, or legal separation
  • Birth or adoption of a child
  • Death of a spouse or child
  • Change in spouse’s employment or insurance status
  • Other events may qualify (contact your HR or benefits department for questions)

What if I miss the open enrollment period for benefits?

If you miss the open enrollment period, you will not be able to enroll or make changes until the next annual open enrollment period — unless you experience a qualifying life event that permits you to make benefits changes under IRS rules.

Who is an eligible dependent?

This varies by employer, but typically an eligible dependent is your spouse and your dependent child(ren) up to age 26. Some employers will also allow domestic partners to be considered eligible dependents.

Can I have other health coverage?

Yes, you can be covered by another group health plan and still receive benefits under most medical plans. This is called “dual coverage” and coordination of benefits (COB) will apply. If you’re enrolled in an employer-sponsored health plan, that coverage is primary for you and you must file your claims under this plan first. If some of your out-of-pocket costs are not covered, then you can file a claim under your secondary insurance.

How will my health benefits impact me come tax time?

The amount you pay for your premium is subtracted from your total pay before any State, Federal, and Medicare taxes are deducted. This means your taxes are lower because the amount of income you’re taxed on is reduced.

To determine if your premiums are taken out pre-tax, look at the Medicare and FICA lines on your pay stub. If your FICA income more than your withholding income, then your premiums are taken out before taxes and cannot be claimed as qualified medical expenses on your return. If your FICA and withholding income are the same, then your premium is taken out after taxes and you can claim it as a qualified medical expense.

Give your employees the necessary tools they need to understand their benefits offerings with this glossary of insurance terms and definitions. Click here to download.