Did you get the memo yet?
It’s open enrollment season!
Yes, I know 23 percent of you would rather clean your toilet than research your benefits options (Aflac told me so), but don’t let your love of porcelain get in the way of saving cash. Because that’s what open enrollment is all about: saving you cash.
And I’m not just talking about saving cash on monthly premiums. I mean saving you cash on all of your out-of-pocket expenses throughout the year and saving cash at tax time because you have the right amount deposited into your flexible spending account.
Unfortunately, too many people are mindlessly checking boxes on their open enrollment form and paying the price down the road. “People are not spending enough time selecting the right benefits,” Matthew Owenby, chief human resources officer at Aflac, told me. “People look at monthly expenses without looking at overall costs.”
How can you make sure you’re not acting like one of the fools in the office? It’s easy. Follow these five steps:
Step 1: Attend the benefits open house
Many, although not all, workplaces have some sort of event to kick off open enrollment. They may call it a benefits fair, an open house, a seminar or a workshop. Whatever it’s called, you want to be there.
Depending on your company, your human resources office will be on hand and possibly representatives from the insurance companies offering benefits. This is your opportunity to get real-life answers to your pressing questions. Questions such as: Does Dr. Fabulous participate in your network? What does this high-deductible thing mean? Are you going to gouge me on co-pays?
Of course, you can get answers to these questions later if you miss your company event. This is just an easier way than sitting on hold for 30 minutes for a phone representative to answer your call. Plus, there may be cookies. You do want cookies, right?
Step 2: Ask about wellness incentives
Happy, healthy workers are more productive and less expensive, so your company has a vested interested in keeping you feeling your best. To do so, many offer wellness incentives that may lower your premiums or provide other perks.
Incentive programs can vary, and some are as simple as getting your blood pressure and cholesterol levels checked in exchange for a premium rebate. Others may require additional effort, such as entering smoking cessation or weight management programs.
You want to ask your human resources office about wellness incentives upfront for two reasons. First, some businesses offer health screenings on a particular day, and you don’t want to miss your chance to attend. Second, if you qualify for a premium incentive, you want to know that before you select your coverage because it might mean you can afford a more expensive plan with better coverage.
Step 3: Don’t renew! Review
Now we get to the meat of the matter. Even if you love your current coverage, you shouldn’t blindly renew last year’s elections. Not only could your needs be changing for the upcoming year, but your insurance company could have made changes to the plan as well.
Here are some questions to ask yourself while reviewing your choices:
- Does our family take specific prescription drugs? Are those covered by the plan and what is the co-pay?
- Is a baby potentially in our future? What is the plan’s maternity coverage like?
- Does the plan cover all our favorite doctors and hospitals?
- If we go to a doctor outside the plan’s network, how much will we pay?
- How do we see a specialist? Do we need a referral or can we see who we like?
- How much are co-pays and co-insurance?
- What about the deductible? If it’s high, can it be paired with a Health Savings Account for a tax deduction?
Your options will likely include a high-deductible option. These plans can be inexpensive and are a good choice for some families, but it’s essential you understand how they work. Aflac found 46 percent of the people it surveyed had chosen a health insurance plan with a deductible of $1,000 or more, but nearly half of those said they didn’t really understand how the plan worked, and 59 percent at least somewhat agreed the plan was financially detrimental to their family.
The takeaway for you? Make sure you understand what a high-deductible plan means for your out-of-pocket costs. If you’re not sure, pick up the phone and call human resources so they can walk you through it.
Step 4: Look at your voluntary benefits options
Health insurance is often the main event during open enrollment, but don’t overlook all your other insurance options.
Many employers offer what are known as voluntary benefits. These benefits require you to pay out-of-pocket for coverage, but premiums are typically much less than what you would pay if you bought a policy on your own. Voluntary benefits include essentials such as disability and life insurance as well as products like cancer insurance, which may not be necessary if you have a good health plan.
Check out our recommendations for the “10 must-have financial products” and see which ones you can pick up at a bargain price during open enrollment.
Step 5: Calculate your flexible spending needs
Finally, we come to your flexible spending accounts, otherwise known as FSAs. These are available in two flavors: a regular FSA to be used for your out-of-pocket health care costs, and a dependent care FSA for child care expenses. In both cases, money deposited into the account is tax deductible.
However, there is a catch. In most cases, if you don’t spend the money in the account within 2.5 months of the end of the plan year, you lose it. Poof! It’s gone. One day it’s yours, and the next it reverts to your employer.
“On average, half of those with flexible spending accounts won’t spend $750 of it,” Owenby says.
$750! Gone! I don’t know about you, but I could find better things to do with $750 than kiss it goodbye.
That’s why it’s so important to spend some time figuring out how much to put into your FSAs. They offer valuable tax savings, so you want to use them but you don’t want to deposit more than you can use in a year’s time.
“We encourage people to look back several years,” Owenby says about how to calculate the right amount to deposit into the accounts. You may have had $2,000 in medical expenses last year, but it could have been $500 for each of the preceding three years. Consider those previous years and then see if you have any major expenses looming (hello, braces!) before making your FSA elections.
See, this wasn’t so bad, was it?
If you’re still confused – and you’d be in good company given that nearly half of those surveyed by Aflac say benefits are too complicated to understand – don’t be afraid to ask for help. Your human resources office exists, in part, to help you with these decisions. Make a call, ask for a meeting and don’t be afraid to ask dumb questions. It’s worth it to look silly in the short term if it saves you money in the long term.
Do you feel that you understand your company’s benefit options? Share with us in comments below or on our Facebook page.