Be careful when choosing 2011 benefits
By Jason Alderman
In the coming weeks, millions of Americans will receive 2011 employee benefit open enrollment materials. Yes, it's a pain to wade through all that information, but simply opting for your current coverage could prove to be a costly mistake. Here's why:
Plan changes. Many benefit plans – especially medical – change coverage details from year to year. If you have more than one option to choose from, compare plan features side by side to ensure you're choosing the best plan for your current situation. Common changes include:
- Increased monthly premiums for employee and/or dependent coverage.
- Increased deductible and/or copayment amounts for doctor visits, prescriptions, preventive care, hospitalization, dental or vision benefits, etc.
- Revised drug formularies (the list of covered medications, including copayment levels for different drug classifications).
- Preferred doctors or hospitals may withdraw from the plan's preferred provider network, boosting the cost to use them or even eliminating them as an option.
- Raising maximum yearly out-of-pocket expense limits.
In addition, the Affordable Care Act states that group medical plans offering dependent coverage now must extend that coverage to adult children under 26 in most cases, even if they no longer live with you or are claimed as your dependent. Ask your Benefits Department if this provision applies and how much you would pay in additional premiums. (To learn more about provisions under the Act, visit www.healthcare.gov.)
Compare with spouse's coverage. Compare your employer's plans with those offered by your spouse's employer, particularly when deciding where to insure your children. Just make sure it's apples-to-apples. For example, one plan may charge lower premiums but have higher deductibles and copayments; or it may limit needed coverage – say your kid takes an asthma medication that one plan doesn't cover.
Review flexible spending account (FSA) contributions. If offered by your employer, health care and dependent care FSAs are a great way to offset the financial impact of medical and dependent care expenses. With FSAs, you pay eligible out-of-pocket medical and dependent care expenses on a pre-tax basis; that is, before federal, state and Social Security taxes are deducted from your paycheck. This reduces your taxable income and therefore, your taxes.
You must re-enroll in FSAs each year – amounts don't carry over year to year. If your health insurance deductibles and copayments are increasing, consider increasing your FSA contributions accordingly. To learn more about how FSAs work, visit Practical Money Skills for Life (www.practicalmoneyskills.com/benefits), Visa Inc.'s free personal financial management site.
Consider family status changes. If you marry, divorce, or gain or lose dependents, it could impact the type – and cost – of your coverage options. For example:
- Compare maternity and pediatric benefits offered by the various medical plan options. Slightly lower monthly premiums might not be worth more restrictive coverage.
- If you use a dependent care FSA, carefully estimate how much childcare (or day care for eligible adult dependents) you'll need next year to maximize your tax advantage.
- Similarly, consider family status changes when estimating eligible expenses for your health care FSA.
- Recalibrate life insurance and disability coverage.
It's worth spending a few minutes reviewing your benefit coverage options for next year, especially when you consider the potential financial consequences of not doing so.
This article is intended to provide general information and should not be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.<< Back to Practical Money Matters
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