Ah, fall. Time for the leaves to turn fiery colors and fall from the trees. Time for hay rides, apple pies and warm sweaters. Time for the family to gather 'round and... review its health plan? That's right: For most employees, fall also marks the beginning of the annual open enrollment period during which you are allowed to change your health plan and sign up for flexible spending accounts (FSAs), which let you set aside pre-tax money (just like your 401(k) contributions) for next year's child care or medical expenses.
While most companies cover a portion of the premiums (in some cases, employees pitch in as little as 20 or 30 percent), you may be asked to pay more of your share soon. According to benefits experts, U.S. companies are being pounded by yearly double-digit health care cost increases. Some will absorb the added expenses, but many companies will ask employees to shoulder more of the cost of premiums. Still others will require workers to pay higher copayments or deductibles. So it's more important than ever to understand your health plan benefits and choose the options that give you the most bang for your buck.
Understandably, most people spend little time combing through health plan descriptions -- it's hardly riveting reading. But resist the urge to bury the enrollment packet under a pile of papers and wait until days before the enrollment period ends to make your choices. You need time to do your homework -- especially if your personal picture has changed recently.
There are a number of life events that might signal a need to change your health coverage -- from the obvious (if you get married, have a baby, or send the kids off to college) to the subtle. For instance, if you are trying to get pregnant or are taking care of an ailing parent, you'll likely require different services from your health plan. Even something as simple as getting glasses or taking a new medication could mean you'll benefit from choosing different options. Certainly if your spouse has new coverage under his employer's plan, you'll want to compare your choices. And lastly, even if your situation hasn't changed, your health plan choices might have. Recently, many doctors and hospitals have been leaving or changing managed-care networks. And as companies shave benefits to save costs, you may find that there's a better option for you.
So start early, and read the summary plan description for each of the health care options your company offers. (Your company's benefits department can provide copies.) If you have questions, ask someone in your employer's benefits office or call the plans directly.
Here's what to consider when making your choice:
Most employers offer a choice between a fee-for-service plan and one or more types of managed care. Fee-for-service plans reimburse you for visits to any doctors or hospitals you choose, minus the requisite deductibles and copayments. The managed care plans could include a health maintenance organization (HMO), a point-of-service-plan (POS), or a preferred provider organization (PPO). In an HMO, you must see the doctors within the plan. PPO and POS plans offer more choice: You'll get the most generous benefits when you go to doctors in the network, but you'll still receive some benefit if you go outside the network for care -- you'll just pay a bit more.
Be sure you understand what services each plan covers, and which hospitals you're able to access. Also, if it matters to you, ask which specialists you're allowed to see and about any chronic care you require.
Moreover, make sure you understand what your out-of-pocket costs will be. The plan with the lowest premium isn't always the least expensive coverage. Look at what you'll pay in deductibles and copayments. And see if services you use regularly are covered under the plan.
If keeping your doctor is a concern, clearly you'll want to know if he or she belongs to the network you're considering. If so, ask for his or her thoughts on the plan. And when switching to a new plan, make sure the doctors you prefer are accepting new patients.
Once you've narrowed down your choices, visit the Web site of the National Committee for Quality Assurance and review the plan's "report card." NCQA provides information on accredited plans' preventive care services, quality of service, and other measures. Also, talk to coworkers who belong to the plan you're considering and find out what they think about the care and service they've received.
If you pay for childcare or care for an ailing parent who is your dependent, or if you expect to incur out-of-pocket medical expenses not covered by your health plan (including your deductibles and copayments, as well as any prescriptions, eyeglasses or contact lenses), an FSA can save you hundreds of dollars. That's because the portion of your paycheck set aside in an FSA is free of both income tax and Social Security tax.
Contributing to an FSA will also help lower your adjusted gross income, perhaps making you eligible for certain tax goodies you might otherwise miss, such as the child tax credit or a Roth IRA.
You'll have to designate how much money to earmark for your spending account. By law, you can set aside up to $5,000 for child care expenses; but while there's no legal limit on the amount you can stash in a medical FSA, most companies limit your total to $2,000 or $3,000. Choose your amounts carefully because any money you don't use by the end of the year, you'll lose. Look to last year's child care or health-related bills as a guide.
It sounds like a lot of work, but making the right choice can save you a lot of money and a lot of headaches down the road. So pour yourself a mug of mulled cider and curl up with those plan descriptions.