Insurance is too important for a last-minute decision :Kathryn Canavan
By: Health Insurance
Submitted: 2009-10-04 18:56:32 | Word Count: 1109
Health care insurance and other benefits cost employees thousands of dollars a year — on average about 30% of their total compensation.
But many employees wait until the last minute to make selections, do precious little research and make big mistakes that cost them in multiple ways. Two examples: paying more upfront for benefits they may not need; and making poor decisions that show up when a health or other emergency arises.
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The 2010 open enrollment season at workplaces nationwide is ramping up as fall arrives.
Given what's at stake, experts say workers should pledge this time around to make better selections. There's a lot of ground to make up: Only 6% of consumers feel completely prepared to deal with health care costs, according to the Deloitte Center for Health Solutions. And most employees spend 30 minutes or less choosing their health plans, according to Cigna.
"People don't put a lot of thought into enrolling in their plans," Cigna spokesman Joseph Mondy says. "Typically, people spend like half an hour deciding. Compare that to how many hours you agonize before you buy a TV."
Some tips to get the most out of your employee plan:
Don't wait until the last minute
Enroll, and do so on time. Don't assume that you'll be automatically enrolled in the plan you chose last year.
"We have this whole month to review things, and we wait until the night before we have to make the decision to open the booklet," says Lenny Sanicola, an employee benefit specialist with WorldatWork, an association of human resources professionals.
His recommendations: Sift through materials early; discuss plans with family members; make a list of questions; and attend your company's face-to-face meetings. If you don't get the answers you need, go to your human relations officer or supervisor. Understand what you're signing up for and what your out-of-pocket expenses are going to be.
"As you get into the 2010 decision-making, there are fewer simple decisions," says Cigna's chief learning officer Karen Kocher.
Include others in decisions. Family members may think that taking advantage of legal coverage, a pet insurance option or flexible-spending account make sense, even if you don't. Those opinions should matter.
Check eligibility requirements
Before you make a decision to jump to your spouse's plan in this rocky economy, make sure you'll be able to return to your employer's plan if you waive enrollment now and your spouse loses his or her job later.
Also, determine whether your adult children are still eligible or newly eligible for your family plan.
"Eligibility is where people can really get tripped up," says Michelle Connor, a senior benefit consultant at CBIZ Employee Services.
Employees should also realize that companies are auditing to ensure former spouses or unqualified adult children are not lingering on family plans. Don't be surprised if your human resources office suddenly requests your offspring's college schedule.
Think about health coverage costs
The single most important question when choosing any health insurance plan is, "What is my annual liability?" Connor says.
Add likely out-of-pocket costs to the premiums being deducted from your paycheck. When you determine likely out-of-pocket costs, put that amount in a pretax flexible-spending account.
Kocher says employees must understand their needs and the available options: "The absolute best fit will not only get you the best coverage, it will also assure your out-of-pocket costs are minimized."
Mondy says websites can often be go-to places for prescription-price comparisons and, increasingly, for cost-and-quality comparisons of medical professionals.
"Find out all the programs your company offers. You may be pleasantly surprised," he says.
One program many people don't take advantage of: flexible-spending accounts.
"One of the things that scares people about an FSA is the use-it-or-lose-it provision, but you can always run out and buy a whole season's supply of cold and flu medication or a new pair of eyeglasses" at the end of the year to use money in the account, says Ken McDonnell, program director for the Employee Benefit Research Institute.
Consider life, disability insurance
If your age or health make it expensive to get private life insurance, your employer can be a good place for that because it's usually less expensive and requires little or no medical underwriting, says Barry Petruzzi, vice president of group benefits for Guardian Life Insurance Company of America. He says employees can use an online calculator to determine whether they should buy more insurance than an employer already provides for free.
Connor also recommends buying short-term disability insurance "every day and twice on Sunday" because it ensures your paycheck.
She says six out of 10 employees will be on disability at some time during their careers, and most will be on short-term disability.
Pregnancy, for example, falls under short-term disability. She says even the group she calls "the young infallibles" are exposed to plenty of risk of short-term injury from sports and auto accidents.
Educate yourself about investments
Jane White, president of Retirement Solutions of Madison, N.J., says employees need 10 times their final year's salary for a retirement nest egg, so save accordingly.
To do that in the best way, says WorldatWork's Sanicola, employees should take advantage of financial seminars and online tools offered by companies, and keep an eye on investing fees.
If you can afford to contribute enough to your 401(k) or other such plan that's eligible for a company match, do it.
"Your net pay won't go down 6% if you contribute 6%, because you're using pretax money," Sanicola says.
Also, if your company provides its match in company stock, divest out of it as quickly as possible, White says. A diversified portfolio is insurance against losses if your company stumbles and the stock price plummets.
Get and stay healthy
Some employers and insurance companies offer financial incentives to employees who use gyms or attend smoking-cessation programs.
Ask if your employer provides any reimbursements. If they do, make lifestyle changes to take advantage.
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