It is that time of year again where your company requires that you to put together your benefit package for the next year. Usually there are not too many options to pick from, but it can still be overwhelming.
I tried to put together a quick workbook that hopefully will help you figure out what options work best for you and your family.
There are usually a few different types of insurance options offered by employers. The two most common types of plans are categorized as Low Deductible Plan (LDP) or a High Deductible Plan (HDP). The LDP usually have a higher per paycheck premium than the HDP but have a lower deductible for the year. The benefit of an HDP is it allows you to put money into an Health Savings Accounts, which allows you to roll over your savings instead of a use it or loose it system like a Medical Spending Account has, which is what you can save into for a LDP.
I keep track of my annual medical spending in my Family Financial Level 3 Planner and use these numbers to help me calculate what plan is the most affordable option based on our previous medical spending. I have included a table to help you estimate what you expect to spend next year with visits and any medical expenses you are expecting.
Planning Co-Pays can be a bit more difficult. To find a more accurate number, you can review your current insurance’s website and find how many times you went to the doctor for the year and use that to multiply your expected Co-Pays with the the times you went to the doctor. For instance, if you went to the doctor 15 times for the year (Not including Well Check Visits, since those do not cost you a Co-Pay) you would take the 15 visits and multiply it by each of your Co-Pay options. If one plan option offers you a $20 Co-Pay, you would calculate your annual expected Co-Pays as 15 x $20 = $300.00.
Some plans have a higher Co-Pay for specialist visits. You can break down your Co-Pays even more if you went to a regular doctor 10 times and 5 times it was a specialist as follows :
10 x $20 = $200
5 x $40 = $200
$200 + $200= $400
Now you can plan on about $400 out of pocket for your Co-Pays to be added to your expected annual spending. Also include any Co-Pays for ER visits or InstaCare visits you may expect to spend. Having these added in will help you decide if being able to put the full amount of the visit towards your deductible for the year versus having to pay Co-Pays that do not go towards your deductible will actually end up saving you money or costing you more money and should help you decide if the High Deductible Plan is actually more cost efficient than a Low Deductible Plan.
To fill out the Medical Benefits Calculator Table, have your employers medical options, available in the company provided benefits handbook, accessible to review and fill out the table.
Annual Premium Expense - (Per Paycheck Premium X Total Paychecks For The Year)
Deductible - (Amount You Have To Pay Out of Pocket Before Co-Insurance Kicks In)
Co-Insurance After Deductible is Met (ex 80/20)
Current Year Spent on Medical out of Pocket - (Estimate or Exact Amount You Spent This Year)
Out of Pocket With Selected Plan - (Meeting the Deductible, Annual Premiums, Co- Pay and Co- Insurance you could expect to pay for the next year based on anticipated spending or current year spending)
Flexible Spending Account- (Amount you can save in a FSA, if plan qualifies)
Health Savings Account- (Amount you can save in an HSA, if plan qualifies)
Total Cost For The Year - (Out of Pocket + FSA/HSA Annual Savings)
Health Care Flexible Spending Account vs Health Savings Accounts
Flexible Spending Accounts (FSA) and Health Savings Accounts (HSA) are accounts the government has allowed employers to offer their employees as a way to save up for medical expenses for the year. A FSA has to be spent in the same year that it is contributed to, which means it is a use it or loose it account. The annual limit to save into the FSA for 2020 $2,700 and is subject to change as the IRS sees fit.
An HSA is an account that functions a lot like an IRA (Individual Retirement Account). Any dollars left at the end of the year are allowed to stay in the account and you are able to invest the funds as well. The limits for 2020 have gone up from 2019 to $3,550 for an individual and $7,100 for a couple.
The IRS does not allow you to deduct health care expenses, unless they are greater than 7.5% of Net Income (Check with a CPA to verify deduction limits). Being able to tuck away an additional $1,250 or $4,400 for a couple, tax free, can make the HSA a very desirable reason to consider signing up for HDP (High Deductible Plan). The tax savings is something to consider when deciding which plan is the most cost efficient for your family.
I always sign up for Dental Insurance. I know that there are varying opinions on whether Dental Insurance is something you should spend on. Each family will have unique reasons that will either make dental insurance something you feel you should have or something you can pass on.
To start, check with your dentist to see how much it costs to have a cleaning done without insurance. Take how many times you would have your cleaning done per person and times that out to find a dollar amount you would spend without insurance. Then take the monthly premium you pay to have dental insurance and times that out for an annual expense. Next, take the annual limit that your dental insurance will cover and decide whether having that coverage is worth it to you.
For me and my family, we do cleanings every six months and usually have a few cavities and larger expenses, like Root Canals, each year. We have a few of us that have sensitive teeth and are always getting cavities. So for us, it is worth the expense, especially since our company plan is so reasonable. But I know some Dental Plans are not good plans. So make sure that you know what your plan covers and what their limits are for the year. Unlike health insurance, dental plans have a maximum amount that they are willing to spend, and anything over that, they will not cover. You still receive the discount they workout with your dental provider, but they will not cover any expense over the limit, per person, per year.
Life insurance policies provided through your employer are usually cheaper than a policy you can get on your own. They usually limit the amount that you can insure, but using your work policy options to build towards your full amount you need for insurance is a way to save money on premiums.
In the workbook I put together you can work through finding the amount that you need to have for life insurance and then can keep track of how much your company provides so that you can go and get your own policy to make up any difference.
It is important to know the difference between Accidental Life Insurance and Full coverage Life insurance. Accidental Life insurance only pays out if you or your spouse are killed in an accident and not from a health concern, like cancer. A lot of companies provide Accidental only life insurance. Consider what your highest concern is for untimely death, is it from an accident or from disease. If you are in a desk job, you are more likely to die from disease than you would from an accident. But if you are a truck driver or a builder, you might have a higher chance of dying from an accident. For us, I use this as additional insurance above what I think that we need to properly protect our family. Since my husband is at a desk for his job, I feel that he has a higher chance of dying from cancer than from an accident. So I make sure that we have his income protected in case he were to die from something like cancer.
Many companies offer a 401K plan match. What this means is that for every dollar you invest into your personal, work provided 401K plan, they will match your contribution dollar for dollar to a certain percentage. Usually those percentages are somewhere between 2-6%. Make sure that you are contributing at least to the match so you aren't walking away from 2-6% of your income each year.
Once you have decided the amount you wish to contribute to your 401k Plan, (If you feel like you could use help with determining how much to invest, see my blog post about Retirement Planning) make sure that you have an allocation that matches your risk factors. This can be intimidating and should be reviewed at least annually. Your 401k Plan provider should offer a Financial Advisor that you can check in with and ask questions about your investments. Make sure you feel comfortable communicating with them. You can also check with your own Financial Advisor, if you have one. If none of those are available, take the time to research investment allocations and the best way to diversify your risk (See my blog post about this). Again, review your allocations annually and make sure your risks haven't changed and that your allocation is still on par with what you have planned.
If you have any questions or comments, leave them below.
Happy enrollment time!