One of the most overlooked parts of an overall financial plan is the benefits package you receive from your employer. Making benefits decision can often be a difficult process. Most of the time, I have found that people wait until the very last day of open enrollment with their employer only to quickly check the boxes that they checked last year without any research on what may be their best options. Remember, that your compensation package from your employer should always be looked at from a total economic package point of view. This means looking at your cash compensation plus benefits plus stock options, fringe benefits, etc. If you view your compensation only from a myopic point of view such as salary, you won't be able to really analyze what you are getting paid from your employer nor the true value of your benefits package.
One of the first decisions you will have to make upon your benefits election is to choose the type of health insurance coverage you want for the next year. It is important to note that your company may have changed health care providers, deductible, or the overall plan they use with the current health insurance carrier so compare closely when you make this election. Here are some items to consider when you select your health insurance through your employer's benefits package.
- What were my 'real' out of pocket medical costs for the prior year? Most employer sponsored retirement plans will have the option of allowing you to put money in an FSA (Flexible Spending Account) which is a way to essentially put away dollars pre-tax for items such as medical, dental, and dependent care expenses and use them on a tax-free basis during the year. The rub on these accounts is that they are use or lose during the calendar year, so you don't want to bank away too much on an annual basis. However, what I have found to be more of the case is that employees either don't participate at all or participate at a very low amount because they haven't taken the time to really calculate their out of pocket costs from the prior year.
- Can I take advantage of a Health Savings Account plan within my employer's plan?Although not all employer sponsored plans offer this type of solution, I predict that you will see more and more of these as annual enrollments continue in the years ahead of us. The Health Savings Account really means that you are choosing a high deductible health insurance plan through your employer (it will most likely be the same insurance company). This will automatically reduce your medical premiums you pay out of pocket, and it will also allow you to bank dollars pre-tax into an account that is NOT use or lose for items such as medical, dental, and vision expenses. This could help you reduce your tax liability for the current year, and it may actually reduce your overall medical cost out of pocket if you don't go to the doctor that often. This is absolutely something to look into come benefits time.
- Do my doctor's still take this type of insurance? If your employer changes insurance companies or sometimes even the type of plan, the doctor's you currently use may not take that particular type of insurance. If you really like the doctor's you currently use, it may make some sense to call their offices and give them the particulars around the insurance company and type of plan you are going to choose so you can stay in the group of physicians you really like.
- Did anything change with co-pay or in/out of network costs? If you don't look at this closely, it may appear to you that your overall premiums out of every paycheck are only going up slightly. However, if there was an increase to co-pay items such as doctor's visits or prescription drugs, then you could see an overall increase for the year. In addition, your plan may have originally covered 100% after your deductible is fulfilled for in network and 80% for out of network procedures. When open enrollment comes, you need to really look at the plan line by line to see if there were any major changes so you don't get hit with unexpected bills.
Analyzing these benefits today takes nothing short of an engineering degree. As health insurance plans have become more and more complex, it is important as the CEO of your family finances to make sure that you choose the most cost effective and best protecting plan to insure your household. You usually have ten to fourteen days during each benefits season to make this election, so ask yourself these four questions when you end up going through your elections here in 2011.
Go to www.oxygenfinancial.net to request a consultation to figure out if you have chosen the right benefits from your employer. If you are a small business, we can set them up for you and shop the market for the best possible plan.
Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®
Co-CEO and Founder oXYGen Financial, Inc
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oXYGen Financial, Inc. co-CEO Ted Jenkin is one of the foremost knowledgeable professionals in giving financial advice and Smart Money Moves to the X and Y Generation.
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