Making the right health care choices during open enrollment
The benefits packages have been delivered and may still be lying on your desk at home or in the office along with the cover letter saying that if you do nothing you will have the same health benefits as last year. Many employees, looking for any excuse to procrastinate, may be asking themselves, "How much could have changed from last year and do I really have to read this?"
"We've done research that shows that less than half of people who get communications from their employer about open enrollment actually read them," says Tom Billet, a consultant at Watson Wyatt, according to a report on msnbc.com. But with more companies offering long-term care, disability insurance, high deductible plans, and flexible spending arrangements, it is possible that employees who are willing to spend an hour or two looking at their alternatives can find some savings, tax benefits, or enhanced coverage options in those packages. Other changes including support for health-related lifestyle changes may have been added.
The cost of the average employee contribution in premiums and co-pays for health care is expected to increase by $330 to about $3,600 this year. Cost savings options include low premium, high deductible plans and tax-advantaged Flexible Spending Arrangements (FSAs).
Anticipating medical needs as much as possible is the key to making good choices in today's benefits environment. Individuals who are in good health and rarely see a doctor should consider high deductible plans. But, "in exchange for less coming out each pay period, there will be a higher cost each time you need a health care service," says Craig Johnson, a benefits expert at Mercer Consulting, according to msnbc.com. Spending habits can also be a factor. Someone who lives from paycheck to paycheck might be better off with a higher premium plan.
Last year, only 35 percent of employees eligible for flexible spending arrangements signed up, according to a report on cnn.money, even though most would have benefited. The FSA allows employees to set aside a percentage of their paycheck before taxes for expected health care expenses. Again, anticipating health care needs, and in effect planning consumption of health care, may be a hurdle for some people.
FSAs can be used for most expenses covered by the medical deduction like over-the-counter drugs, and employees may withdraw money for expenses even when they have not yet made their full contribution. An employee who is married and in the 28 percent tax bracket can save more than $2,000 in taxes by putting aside $7,500 in an FSA.
But the money in FSAs does not roll over from one year to the next, like a Health Savings Account or Archer MSA, and it is not portable, so Billet recommends that people contribute about half of what they expect to pay out.
Employees should also be checking their packages for other changes from last year. Some employers are providing incentives to workers to lose weight or stop smoking, or are adding penalties or premium hikes for those who will not change an unhealthy lifestyle, cnn.com reports. Some employers have added disease management programs with free drugs to cover chronic conditions like diabetes or asthma. An added cost in some cases is a "spousal surcharge" when workers and their spouses are each covered by their own employers.
Employers are recognizing that employees may need help in making choices that fit their individual circumstances. J. D. Power and Associates, a global marketing information firm, suggests that human resources departments encourage employees to:
- Do your homework. Thoroughly review enrollment materials.
- Go to any open enrollment meetings or on-line sessions offered. . . Don't be embarrassed if you don't understand something. There are often so many choices that even health plan employees sometimes don't understand parts of their own plans either.
- Understand and learn what the basic terms mean. . . Co-payments vs. co-insurance. "In-network versus out-of-network."
- Verify if your physician and hospital are part of the network.
- Find out others' experiences with the plan in which you are interested.
The bottom line is that taking the time to read through health care plan information each year can result in better benefits, tax savings, and the knowledge that you are making smart choices.