How to choose your 2009 employee benefits: Part 1

What are the signs of autumn? Falling leaves, frosty mornings, and Open Enrollment. Millions of workers face the seasonal conundrum of choosing the right employer-provided health insurance package, flexible spending options, life insurance, and other benefits for the following year. In this multi-part series, we'll help you sift through the choices.

Part 1: Health-care benefits

Troubling news: Employees' out-of-pocket share of health-care costs is likely to rise to $3,826, up 8 percent from 2008, according to Hewitt Associates, an employee benefits consulting company. Employers are requiring employees to take on higher deductibles and co-pays, and sometimes to pay more for spouses and children.

Comforting news: This is one time in the year when employees who have a choice of health plans through their employers may be able to switch insurers without regard to pre-existing conditions.

How do you choose a plan?
The most important role of health insurance—indeed, of any insurance—is to cover the big, catastrophic stuff that you couldn't possibly handle on your own. Ask your employer's human resources department or administrator for a detailed description of the offered plans' benefits, as well as  annual maximum out-of-pocket expenses. At the Consumer Reports Health Web site, you'll find an insurance calculator that determines the maximum annual out-of-pocket costs you'll pay through a given health plan under five different health scenarios. On that page, you'll also find advice on comparing HMOs to PPOs. Click here for more advice on avoiding 5 common insurance-shopping mistakes. Insure.com, a vendor of insurance products, offers explanations of the ins and outs of employer health plans.

How much should you put in your flex plan?
Once you've chosen your insurance plan, it's time to determine your likely out-of-pocket costs based on your past medical history. You can use those past costs to estimate your contributions to an employer-sponsored medical flexible-spending plan, if offered. The IRS allows individuals and couples filing jointly to fund such an account up to $5,000 a year with money that's subtracted, pre-tax, from paychecks. Funding the account with $3,000, for instance, would save $840 in taxes next year for someone in the 28 percent tax bracket.

If you don't have evidence of the last 12 months of out-of-pocket costs, ask the insurer to provide your medical records. Pharmacies you deal with regularly may be able to give you similar records. (CVS's "ExtraCare" card program, for instance, registers a cardholder's purchases throughout the year; upon request it will then e-mail or snail-mail cardholders a list of their flex-plan-eligible expenses.)

You also may have some idea now of new future needs. Will a procedure or condition from this year require follow-up care in 2009? Does a medical device need to be replaced or upgraded? Are you expecting a baby? Will your 11-year-old be getting braces?  On the savings side, will an adult child soon be getting coverage from his or her own employer? Is a member of your family now eligible for Medicare? IRS Publication 502 gives a general outline of medical expenses that may be covered by an employer flex plan. But check directly with your plan, since employers are given some leeway to leave out some IRS-approved expenses from their list of eligible reimbursements.

To determine your likely out-of-pocket costs:

• Estimate the number of office visits, prescription purchases, and procedures expected in 2009, and multiply by the expected co-payment or unreimbursed amount. Let's say your child sees an out-of-network speech therapist for which your share would be $25 per visit, with a cap of 24 visits a year. A year's worth of visits would cost 24 x $25, or $600.
• Multiply your expected monthly premium by 12.
• Add all those costs together, and include the projected maximum deductible for 2009.

That's your baseline out-of-pocket cost. Some experts recommend funding your flex plan with slightly less, in the event you don't spend everything. But what's not used in one year cannot be carried over to the next. —Tobie Stanger

Next part: Dependent-care flexible spending plans

Comments

[Kristin Erman]

What about determining the break-even point on dental insurance? There the deductibles and copays change with the procedure. How do you determine how many filings you're going to have in one year? Then there's the issue of crowns--the plans won't cover anything until you've been with the plan for a year and then covers only 50%. It seems like you've got better odds at a casino. Is there a website that discusses any of this?

[Tobie Stanger]

Kristin,

Just searching around, I found an interesting "dental plan cost esimator" provided by the state of Florida for citizens, based on dental costs in Florida. Perhaps by using the words, "dental cost estimate" and your state's name in a search engine, you can find something similar.

Here it is: http://www.myflorida.com/mybenefits/calculator/DPCE.htm

I still think your best bet is getting a list from your employer's insurer of what the specific dental plan will pay, and basing your projected costs on last year's dental visits and procedures. Add to that subtotal things you know are coming up, such as planned dental surgery or braces. No web site that I know can help you predict what's coming.

Good luck,

Tobie Stanger
Consumer Reports

[Gene]

And what about non-employer health plans? Being self-employed I pay 4x that of an employee - even with a huge deductible.

[Tim]

You have a choice? That must be nice. I just get stuck with what my employer gives me. Sure, I could go get another job, but that's not the best option in today's economy.

It sure would be nice if every employee of every company had a choice, rather than just those that have employers that can afford to give their employees choice.

Tim

[Lance]

I do not believe you can get reimbursed by an FSA for your premiums, so that does not make sense to include in your cost estimates.

[Terry]

I am retired and travel a lot. I'm looking for an individual dental plan that has truly nationwide coverage. A preliminary search on Google has convinced me that I could spend the rest of my life searching. Any suggestions or recommendations?