It’s “open enrollment” season for many people so it’s time to choose employee benefits! Understanding how health insurance works is like learning a whole new language, but understanding it can save you a lot of money.

Two terms that can cause confusion are “deductible” vs “out-of-pocket maximum”. The “deductible” is the amount you have to pay out of your own pocket prior to your health insurance kicking in. Every health insurance plan has a different deductible.

But, the “out-of-pocket maximum” represents the annual cap on your healthcare expenses. Once your qualified spending reaches this amount, the insurance company will cover all qualifying costs beyond that for the rest of the policy period (usually the calendar year).

It’s important to look out for these when shopping for a health insurance plan. A plan with a lower deductible will have a higher monthly cost (premium), so you have to do this weird dance of predicting how sick you’re going to get next year.

One important note. Some fellow personal finance enthusiasts might be tempted to choose a high deductible health plan (HDHP) so that they can invest money inside a Health Savings Account (HSA). This is great, but if you expect lots of medical expenses this may not be right for you. Remember, never choose your health plan just so you can have access to an HSA. Your health (and health insurance) is the priority!

For the most part, you can only change your health insurance plan during “open enrollment”. So now is the time to do your research and make sure that you have the right insurance for you and your family.

As always, reminding you to build wealth by following the two PFC rules: 1.) Live below your means and 2.) Invest early and often.‎

-Vivi & Shane