Major changes to health insurance coverage and costs, new rules for flexible spending accounts and some interesting new employee benefits make it particularly important to review your options carefully this year. Here are five ways to make the most of these changes when selecting your 2011 options.
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Health care overhaul changes and ever-increasing health care expenses are prompting most employers to boost premiums, co-payments and deductibles for their health insurance plans in 2011. If you have several plan options, the one you picked in the past may no longer be your best choice.
It’s important to compare premiums, but you also need to add up your potential out-of-pocket costs for each plan. For example, if you take a lot of medications with high co-payments, the plan with the lowest premium may cost you more in the long run.
Many employers are steering employees toward high-deductible health insurance policies as a way to encourage them to pay closer attention to their medical expenses. As an incentive, some are offering competitive premiums and contributing to employees’ health savings accounts, which give employees tax-free savings to use for medical expenses at any time. Many employers offer tools on their intranet sites to help you run the numbers for your plan options.
The big change for this year’s open-enrollment period is that you’ll be able to add adult children up to age 26 to your health insurance coverage, even if they had aged off the policy in the past. And a child can be covered under your plan even if he or she doesn’t live at home, isn’t your dependent for tax purposes and is married. You need to add your child during open-enrollment season for coverage to begin the next plan year (generally Jan. 1).
If your employer charges one rate for family coverage, and you have younger children on your policy, you might not have to pay extra to add your older child. But if your employer charges separately for each dependent, it might be cheaper to get your adult child a policy of his or her own. Healthy adults in their 20s can usually buy a policy for less than $100 a month.
FSAs can help lower your taxable income and give you tax-free funds to pay out-of-pocket medical expenses throughout the year. Health care reform makes some key changes to FSAs for 2011 that will affect how much you contribute, how you can spend the money and which of your family members can benefit.
Many employers also let you set aside up to $5,000 in a dependent-care flexible spending account, which gives you tax-free money to use for child care for children under age 13. Before you sign up for your employer’s dependent-care flex plan, though, it’s important to calculate whether you’ll come out ahead by using the money from the FSA for those costs or claiming the child care credit on your taxes.
You may also be given the choice during open-enrollment season to buy extra life insurance, disability insurance and long-term care insurance beyond coverage provided by your employer.
You usually have to pay for this extra coverage, but you could benefit from a group discount. However, the quality of these deals can vary a lot, depending on the type of insurance.
First, calculate whether you need extra disability insurance to fill any gaps in your employer’s plan. Many employers offer a limited amount of disability insurance to their employees as a free employee benefit.
But these policies generally cover just 60 percent of your base pay (not counting any bonuses), and your pretax monthly benefit may be capped at $5,000 to $10,000. If this isn’t enough to cover your bills, consider buying extra coverage through your employer.
You can generally get a good deal on this extra coverage during open-enrollment season, and you can keep the insurance if you leave your job or start your own business, when it often becomes much more difficult to qualify for new coverage. Also, when you pay the premiums yourself, you won’t have to pay taxes on the benefits.
Your employer may offer long-term care coverage during open enrollment too. In most cases, employees have to pay the full premium themselves, but they’ll generally get a group discount of 5 percent to 10 percent. These group policies tend to be a better deal than they had been in the past, often offering good-health and spousal discounts.
But it’s a good idea to compare the cost against the cost of buying a policy on your own. Keep in mind that the insurer can increase premiums after you buy a policy.
Your employer may also let you buy extra life insurance during open-enrollment period, to supplement any free coverage you get as an employee benefit. It may be a good idea to get additional life insurance, especially because employer-paid policies usually provide less coverage than most people need, and the coverage disappears if you leave your job.
If you’re healthy, you may be able to find a better deal on your own. However, buying the extra coverage through your employer could be a good option if you have any health issues that otherwise make you uninsurable.
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