Open enrollment is an annual point of stress for many Americans. The amount of benefits education available to workers varies by employer, but over one-third of workers (and 54% of millennials) feel they don’t fully understand the benefits they’re signing up for.
With so many people experiencing a deer-in-headlights moment during open enrollment, many Americans will likely have made one of three mistakes: purchased too much health insurance, purchased too little or missed open enrollment altogether.
Here’s what you should know about making a mistake during open enrollment, as well as how to handle each of these common mistakes during and after the open enrollment period. That way, if you find yourself in any one of these situations, you’ll have options to secure your financial health until next year.
Are mistakes during open enrollment common?
Whether you receive health insurance through an employer or through the Affordable Care Act (ACA) Health Insurance Marketplace, open enrollment is an annual window during which anyone aged 18 and up can apply for health insurance coverage. The amount of time you have to enroll in a health insurance plan will depend on whether you’re applying for insurance through an employer (where the window can be anywhere from two to four weeks) or through the Marketplace, where the open enrollment period is 45 days.
Despite the amount of time, mistakes can and do happen. In fact, around 24% of Americans admit to making a mistake during open enrollment. The most common mistakes include missing the open enrollment deadline altogether (26%) and failing to fully explore the details of the plan they’ve enrolled in (28%). Millennials appear to struggle with open enrollment more often, with about one-third admitting to mistakes during this period.
Long story short, if you made a mistake, you’re not alone. But making mistakes isn’t the end of the world.
Try to fix mistakes before the enrollment period ends
The good news is that as long as your open enrollment period is still open, you can fix any mistakes you’ve made and change your plan without penalty. As soon as you notice the mistake, log back into the platform you’re using for open enrollment and switch to the plan that makes the most sense for your health care needs and budget.
If necessary, you may need to contact the person at your company who is responsible for handling benefits. Hopefully, however, your organization is using a manual system that makes this process easier on you.
As always, budgeting should be your go-to if you find yourself in a less-than-ideal health insurance situation. Whether you’re paying too much or too little for insurance, or if you don’t have coverage at all, your best option is going to be to reduce spending on nonessentials, increase savings into a savings account and make sure to put a reminder on every calendar your own so that you can fix these problems during next year’s open enrollment period.
Problem 1: I purchased too much insurance
With hospital bill horror stories as a backdrop, many Americans opt to purchase high-cost health insurance plans during the open enrollment period. While understandable, this can lead to negative financial outcomes when the amount of insurance purchased far exceeds what was necessary and creates a financial burden on the insured individual.
A study conducted by the Teachers Insurance and Annuity Association (TIAA) discovered that workers who have lower salaries tend to be more likely to purchase too much health insurance. The study also found that workers who have longer tenure tend to overpay more often.
Solution: Start budgeting
Unless you have a qualifying life event or you purchased an individual health insurance plan, don’t count on being able to cancel or switch your policy. Instead, make a budget plan for the coming year.
To start budgeting, do the following:
- Identify required expenses, such as housing and utilities
- Identify unnecessary expenses, such as entertainment, most clothing or eating out
- Cut out as many unnecessary expenses as possible
- Restrict spending to only essentials
- Roll the money you save into a savings account
Tracking expenses can be difficult, so you may want to rely on a budgeting and expense tracking app, such as You Need a Budget, Mint or PocketGuard.
Problem 2: I didn’t purchase enough insurance
Purchasing too little insurance is exceptionally common. Throughout 2020, for example, around 21% of Americans had health insurance coverage but were underinsured. That means they purchased too little coverage and had to pay more out of pocket than they had anticipated.
It can be tempting to go with the cheapest insurance plan during the open enrollment period. But if you find yourself using that insurance too often, you may end up with large medical bills that are hard to pay for, costing you thousands or tens of thousands of dollars in the long run.
Solution: Create a health savings account
A health savings account (HSA) is a good way to hedge against potential medical bills that aren’t covered under a low-cost health insurance plan. You can create an HSA at any time, but HSAs are only available to those who have what’s known as an HSA-qualified health plan (also called a high deductible health plan [HDHP]).
Assuming you qualify, an HSA is also an investment vehicle. It earns tax-free interest, and withdrawing from the account for qualified medical expenses is also tax free.
Alternatively, you may have an insurance plan either through the Marketplace or through your employer that is not an HDHP but is still not enough to cover your health care costs. If that’s the case, follow the advice we recommended above: create a budget and roll your savings into a savings account that you’ve earmarked specifically for health costs.
Problem 3: I missed open enrollment completely
Let’s say you completely missed open enrollment. You may not be completely out of luck. In most cases, those with preexisting insurance plans will find their plans renewed if no action is taken. That said, if you need to update to a different plan, you may need to refer to the previous two sections.
Solution: Choose alternative insurance options
Those without preexisting insurance plans who missed open enrollment through their employer may be able to opt for insurance through the HSA Marketplace. The Marketplace has a longer enrollment period that runs a bit later than most employers’ open enrollment periods, making it a good backup option.
If you missed both of these windows, you may want to consider short-term health insurance plans, which tend to cost more and cover less but aren’t bound by open enrollment windows. You can sign up for them at any time through private insurance.
Maxime Rieman is product manager at ValuePenguin. Educating and assisting shoppers about financial products has been Rieman's focus, which led her to joining ValuePenguin, a consumer research and advice company based in New York. Previously, she was product marketing director at CoverWallet and launched the personal insurance team at NerdWallet.
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