What to watch out for during open enrollment
By gulfsouthb32553561, Oct 30 2018 12:53AM
It's open enrollment season, which for many workers, might not mean much. That's a costly misconception.
Nearly half of all employees spend 30 minutes or less reviewing their benefits before enrolling, according to recent research by employee benefits provider Unum.
The vast majority, or 93 percent, choose the same benefits year after year rather than making changes during the open enrollment period, according to a separate WorkForces report by Aflac.
"The decisions you make during open enrollment season can have a financial impact on you for the entire year," said Julie Stich, an associate vice president at the International Foundation of Employee Benefit Plans.
Michael Simonds, the president and CEO of Unum, recommends considering short-term needs, such as braces for your child, and the long term, as in life insurance. "This is where being informed is important," he said.
At the very least, workers should review their coverage to make sure it is still their best option.
This year, in particular, there could also be some changes to plans that are offered and the details of those offerings, making it even more important to pay attention.
Here are a few of the things to look out for:
1. Health insurance
For starters, health insurance is the most significant component of your benefits. Be aware that premiums — and deductibles — are going up.
Annual family premiums for employer-sponsored health insurance rose 5 percent, to an average $19,616 this year, according to the 2018 Kaiser Family Foundation Employer Health Benefits survey.
On average, workers this year are contributing $5,547 toward the cost of family coverage, while employers pay the rest.
In addition, more workers now have a deductible, and that deductible is rising. The average single deductible is $1,573 for workers who have one, up from last year.
"Health costs don't rise in a vacuum," said Kaiser foundation President and CEO Drew Altman, in a statement. "As long as out-of-pocket costs for deductibles, drugs, surprise bills and more continue to outpace wage growth, people will be frustrated by their medical bills and see health costs as huge pocketbook and political issues."
2. Health savings accounts
On the upside, contribution caps to health savings accounts, which pair with high-deductible health-insurance plans, are also heading higher.
For 2018, employees and employers can contribute a total of up to $3,450 for individual coverage and up to $6,900 for family coverage. In 2019, those totals will increase to $3,500 for individual coverage and $7,000 for family coverage, according to the IRS.
The average annual employer contribution to health savings accounts, or HSAs, is around $600 for individual employees, and $1,250 for employee family plans, according to the benefits consulting firm Zenefits.
Check to see if your employer offers a flat contribution or matching funds. Ideally, aim to max out those contributions for the year, Stich said. Contributions then grow on a tax-free basis and account holders can take distributions to cover qualified medical expenses.
(For this reason, more Americans are also using HSAs to supplement their retirement savings.)
3. Life insurance
Even if you already have a policy through work, it could be a fraction of what you need to protect young children or other dependents. Experts say the policy should cover at least one year's worth of income, at the bare minimum.
Consider what's the right amount for you, then weigh whether you want to buy additional coverage, or supplemental insurance, through your workplace group plan or shop for your own individual term life insurance policy, a move many advisors recommend.
It may not be as expensive as you think. Getting $50,000 worth of coverage on a 20-year term-life insurance policy would cost a healthy 40-year-old woman about $180 a year and about $200 a year for a man who is the same age, according to PolicyGenius.com.
4. Disability insurance
Disability insurance is often the most overlooked employee benefit, according to Unum's Simonds. However, these plans can help replace a portion of your paycheck if you get sick or injured and can't work.
More than 1 in 4 of today's 20-year-olds can expect to be out of work for at least a year because of a disabling condition before they reach retirement, Unum found.
In general, plans will pay 40 percent to 60 percent of your salary when you need it and they are considered the most cost-effective form of income protection you can buy.
In most cases, a long-term disability insurance policy will cost 1 percent to 3 percent of your annual salary, starting at around $25 a month and going as high as $500 a month, according to PolicyGenius.com.
Plus, the younger and healthier you are, the cheaper it will be.
While you are at it, see if your employer offers other voluntary benefits, such as auto, homeowners or long-term care insurance, Stich advised. The firm may have been able to negotiate a discounted rate.