Resist the temptation to ignore annual benefits enrollment at work as your costs and accessibility to insurance coverage may be changing.
Enrollment season is when employees select their health, life and disability insurance for the following year. Though the decisions workers make during this period will shape their finances and their paychecks, very few of them put much thought into their choices.
“Most people spend less than 30 minutes on benefits enrollment,” said Dave Mahder, chief marketing officer of group and worksite markets at Guardian Life Insurance. One in 4 employees simply re-elect the same set, he said.
“It’s helpful for people to understand that benefits enrollment is important, and that you should spend the time and do your homework,” Mahder said.
Start with health care
When you assess your health-care choices this fall, see if your company is adding a high-deductible health-care plan as either an option or the sole form of coverage.
More employers are introducing high-deductible health plans. Fifty-four percent of the 1,204 benefits professionals Guardian polled this spring said they would take this step, up from 48 percent in 2014.
Your employer may offer a tax-advantaged health savings account (HSA) along with a high-deductible plan to help defray qualified medical expenses, but your plan needs to meet certain conditions. In 2016, this means you’re paying at least $1,300 before you reach the deductible if you have individual coverage, and $2,600 for family plans. That may be easy for many to attain: 60 percent of the 1,439 workers polled by Guardian said their deductibles already exceed $1,200.
An HSA can present an attractive savings opportunity, especially if your employer makes a contribution. You and your company can chip in up to $3,350 to an HSA this year, if you have individual coverage, or $6,750 for family plans. Those over 55 can make a catch-up contribution of $1,000.
Some employers have started offering critical illness coverage. This insurance supplements medical and disability coverage at work, providing a payout if the policyholder has a specific health condition.
Be careful: This insurance isn’t comprehensive. “These [policies] tend to be more narrowly defined,” said Cameron Congdon, North American client delivery leader at Willis Towers Watson. “It’s not the right choice for everyone.”
Know your providers
In order to save on costs, your employer might change your provider network, so the doctors and hospitals you used in previous years aren’t available — or they are not available at the same level of copayment or coinsurance.
Forty-five percent of 600 employers polled by Willis Towers Watson in June and July said they gave employees access to “centers of excellence”— facilities with preferred medical personnel — for back, knee, cardiac and infertility issues. More than half of the participants will offer this next year.
“Employees need to pay close attention to the providers in the network, and if they have differentiated copays or coinsurance, which tier are those providers in,” said Congdon.
Reassess life insurance needs
Don’t just check off last year’s selection for life insurance. Instead, make your decisions based on the amount of coverage you’ll need — and revisit that number in case of a major life event, such as a divorce, marriage or a new child.
Fifty-four percent of private industry workers had access to employer-sponsored life insurance benefits as of March 2016, according to theBureau of Labor Statistics.
The right amount of insurance to purchase will depend on your specific income needs, said Matt Cosgriff, a certified financial planner at BerganKDV in Minneapolis. Considerations include whether your spouse works, and whether your household has enough assets to meet your needs.
Your employer can provide you with up to $50,000 of group term life insurance without it being considered taxable income to you. If your needs go beyond that, however, you might consider filling in the gap with additional coverage, either with supplemental life insurance at work or with affordable term coverage from outside of the plan.
Don’t forget that you may not work at that employer forever. Make sure that you can take your coverage with you.
No skimping on disability
Disability coverage isn’t as straightforward as life insurance. But it’s still important, as it protects a portion of your income in the event you can’t work.
Distinguish between short- and long-term disability insurance. The median length of coverage for a short-term disability plan is 26 weeks, according to data from the BLS. The maximum length for a long-term disability policy will vary, but most of them have a maximum amount payable.
Don’t anticipate a windfall from your disability benefits.The median income replacement rate for short-term coverage is 60 percent, according to the BLS. Meanwhile, the maximum payout for long-term plans in 2014 was $8,000 per month, the federal agency found.
Get to know the details of your employer’s policy. Your insurance may require that you undergo an “elimination period” before you start receiving short-term disability payments, said Cosgriff of BerganKDV.
Whether you can even qualify for benefits under your company’s policy will depend on how your employer defines “disabled” in the plan.
If your policy defines “disabled” as being unable to perform “any occupation,” then you’ll be denied benefits if you can perform any job. An “own occupation” policy is more generous, as it’ll pay out if you’re unable to perform the duties of your specific job.
Finally, be aware of whether you’ll have to pay taxes on your benefits. The extent to which you pay taxes will depend on who paid for the coverage.
“A hiccup that people make is that they forget disability benefits are taxable,” said Cosgriff.
For instance, if you and your employer chipped in, then the benefit you receive that’s due to your company’s policy payments is reported as income.