Taking Full Advantage

What you need to know during open-enrollment season

Fall means more than the kickoff to football season. It’s also open enrollment season: the time when employees can make changes or enroll in new benefits for the coming year. So when you’re calling the plays for 2008, what should be on your mind?

Home in on healthcare: “Employers are offering more healthcare options,” says Sara Taylor, national annual enrollment leader at Hewitt Associates, a consulting firm based in Lincolnshire, Illinois. If your company offers multiple health plans, your most important decision will be choosing among them.

The choice is crucial because so many dollars are at stake, and more of those dollars are coming out of your pocket. Though employers are paying 59% more for healthcare than they were five years ago, employees are paying 79% more, according to the Towers Perrin 2007 Health Care Cost Survey. The average employee cost is $1,872 this year, up from $1,044 in 2002.

Determine your deductible: The main reason for the expansion of healthcare plans is the addition of high-deductible health insurance by many employers. Instead of being offered a $500 deductible, for example, you might be offered a plan with a $2,000 deductible. That is, you’d be responsible for paying $2,000 worth of doctors’ bills yourself before the insurance kicks in. Why would you want to be responsible for an additional $1,500 in medical bills? Because high-deductible policies have lower premiums. You might pay $50 to $75 a month less with a high-deductible policy, depending on how much of the cost savings your employer will share with you.

Consider your circumstances: “If you’re living from paycheck to paycheck, high-deductible health insurance might not be a good choice,” says James Ralph Jr., who heads a full-service insurance agency in Southfield, Michigan. “That’s especially true if you have children.”You needn’t rule out high-deductible plans, though. If you and your family members are in good health and you can cover a few thousand dollars of unforeseen expenses. “Many people are over-insured,” says Taylor.

Be flexible: Ralph advises employees to fund a 125 plan, which might also be called a cafeteria or flex plan. Whatever you call it, the idea is to divert some of your pretax salary into the plan. Then those dollars can be used to pay medical or dependent care bills, depending on the plan. You save on taxes because you’re paying bills with money the IRS hasn’t touched.

Don’t overload on these plans. Make sure you know whether unused funds will be forfeited by Dec. 31, or March 15 of the following year.

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