5 Ways You May Be Overpaying for Health Insurance

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If you get your health insurance at work, then you've got some big decisions to make. Drag your feet even a few days and you may leave some significant savings on the table.

That's because at many companies this is open-enrollment season. At most jobs, workers get one chance a year to make changes to their health insurance. Of course, the easiest thing to do is just to pick the same health plan and coverage options you did last year. But often, that can be a big mistake.

Here are five ways that you may be paying too much for coverage, and how to make money-saving switches before it's too late.

1. Overinsuring Yourself.

Health insurance involves two costs: the premiums that get taken out of your paycheck, and what you have to pay at the doctor. Many workers buy the most expensive insurance they can, so that they never have to worry about anything but a small co-pay when they visit the doctor or go to the hospital.

But if you're relatively healthy, less comprehensive insurance could save you a ton in premiums. If you're paying for expensive coverage that you never use, then you're throwing away money that you could use for other things. You may be able to save a ton by choosing a health plan that doesn't cover as much. That in turn will boost your take-home pay a bit each paycheck -- and those savings will add up over the course of a year.

2. Failing to Plan Ahead and Paying Too Much Out-of-Pocket.

While it's hard to predict higher medical bills, one area where you can predict them is if you're expecting a baby.

If you're pretty certain your medical expenses are going to rise in the future, you may want to pay up for better coverage so you can save on out-of-pocket costs throughout the year. By changing to more comprehensive insurance, you may be able to get most or all of your maternity costs paid for -- and that's often worth the extra premiums.

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3. Assuming You'll Get the Same Coverage as Last Year.

You may assume that if you do nothing, nothing will change next year. But with employers seeing their benefits costs go up, you need to take a look to make sure your employer hasn't changed plan providers or types of coverage. Sometimes, you may need to switch to a more expensive option just to maintain the benefits you used last year.

4. Ignoring the Tax Savings of a Flexible Spending Account.

Beyond insurance, another decision you need to make during open enrollment is how much to set aside in a flexible spending account. These accounts let you take money out of your paycheck on a pre-tax basis that you can then use for medical expenses throughout the year. The plus is that you get a tax break, but the downside is that if you don't use the money, you lose it.

To get an estimate of how much to set aside for 2012, figure out how much you spent out-of-pocket on eligible medical expenses this year. That should give you a good starting point, from which you can add or subtract any expected changes.

5. Assuming You and Your Spouse Should Be on the Same Plan.

If you're married and your spouse also has health insurance at work, take a look to see which plan provides better coverage -- and which plan is better for each of you. Often, the best choice is for both spouses to stick with their own individual plans, but choosing who takes out family coverage can end up making a big difference.

Don't Miss Your Chance!

Dealing with health insurance is neither fun nor easy. But making the right choices can put some more money in your monthly budget for other things. So whenever open enrollment comes around, be sure to take advantage before the window of opportunity closes.

Motley Fool contributor Dan Caplinger deals with insurance way too much so you don't have to. You can follow him on Twitter here.

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