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As we all reel from higher prices on everything from steak to gas to furniture to bedding, here’s another big-ticket item that you need to think about: health insurance. In its annual survey of costs, Kaiser Family Foundation (KFF) found that annual premiums for employer-sponsored family health coverage is up 4 percent from last year, “with workers on average paying $5,969 toward the cost of their coverage. The average deductible among covered workers in a plan with a general annual deductible is $1,669 for single coverage.”
Given a renewed focus on the fragility of our health and the surge in job leavers and changers currently, this would seem to be an especially important Open Enrollment benefit season. Unfortunately, as I noted when writing about Medicare, the vast number of choices that we need to make can lead to decision fatigue, which in the end, prompts us to throw in the towel and just do what we did last year. That might be a costly mistake, so let’s fight the impulse and make smarter decisions.
Start by reviewing your existing health insurance coverage, what you spent in 2021; and then try to project what your health care costs will be in 2022. Be mindful that amid COVID, you may have skipped routine appointments that you need to factor in for next year. Then compare available plans to see what they cover; how much they cost, including co-pays and deductibles; and whether your doctors are in the network. Don’t forget to identify regular medications that you take and make sure that the plan covers them.
To reduce the annual sticker shock, consider a High Deductible Health Plan (HDHP), which offers lower premiums and is paired with tax-advantaged Health Savings Accounts (HSAs). (For 2022, the IRS defines a high deductible health plan as any plan with a deductible of at least $1,400 for an individual or $2,800 for a family.) If you're generally healthy and want to save for future health care expenses, the HDHP/HSA may be an attractive choice. Or if you're near retirement, it may make sense because the money in the HSA can be used to offset costs of medical care even after retirement. The maximum contribution for 2022 is $3,650 for an individual and $7,300 for a family. Those who are over age 55 can make an extra $1,000 contribution.
The popularity of HDHP/HSA options has diminished the focus on Flexible Spending Accounts (FSAs), but many companies still provide this option. In 2022, you can set aside $2,850 pre-tax to help pay for unreimbursed medical expenses. Critics of FSA’s have lamented the fact that they were “use-it-or-lose it” plans, which means you had to incur eligible expenses by the end of the plan year or forfeit any unspent amounts. However, COVID-related legislation allows a full rollover of unused funds from 2021 to 2022, provided that your company agrees to allow it.
For those who are not covered by a workplace plan, there are changes to the Affordable Care Act (ACA), which are important. To start, Open Enrollment began on November 1, and runs through January 15, 2022. However, if you want coverage to begin on January 1, you should enroll by December 15. Otherwise, coverage will start February 1. If you are using a state-run marketplace, check on those specific Open Enrollment windows, because they may be different than the federal government deadlines.
There is some good news when it comes to costs for ACA participants. The average benchmark plan premium will be about 3 percent lower than in 2021, according to the government, but in some state-based marketplaces, there could be a modest increase. Additionally, ACA subsidies that were enacted under the American Rescue Plan Act remain in effect for 2022. The Kaiser Family Foundation (KFF) has more information about ACA changes that could impact family coverage.
RETIREMENT BENEFITS:
Employer Based Plans: In case you missed it, the IRS announced that the contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan will increase to $20,500 in 2022, up from $19,500 for 2021 and 2020. The catch-up contribution limit for employees aged 50 and who participate in these plans remains unchanged at $6,500.
Roth Plans: Roth versions of the above-mentioned plans allow you to make the same level of contributions using after-tax dollars. When you access the funds in retirement, the withdrawals are tax-free. Roth 401(k)s are great for those who expect their tax brackets to rise in the future and may also be worth considering for higher income employees, because Roth 401(k)s are not subject to minimum distribution requirements after age 72, provided they are rolled over to a Roth IRA.
Individual Retirement Accounts (IRAs): The limit on annual contributions to a Traditional or Roth IRA remains unchanged at $6,000 for 2022, and the catch-up contribution for those aged 50 and over remains $1,000. If you are covered by a workplace retirement plan, you may also be able to deduct contributions to a traditional IRA if you meet certain conditions. Go to IRS.gov for more information on various retirement plan changes for 2022.