It's that time of year again when you choose your employee benefits! Most employers allow you a few weeks every year, usually in the fall, to choose your benefits for the upcoming calendar year. It's important to choose your employee benefits wisely, because you won't get a chance to change again until the following year. Of course, you may also change your benefits if you experience a qualifying life event like a job change, marriage, or birth of a child.
Employee Benefits: Health Insurance
Health insurance is the first thing that comes to mind when most people think of employee benefits packages. And it certainly is an important choice! Understanding the various options for health coverage is beneficial to physical therapists as consumers of healthcare as well as providers of healthcare. Just to make sure everyone is on the same page, let's go through a few basic definitions:
Deductible: The amount that you will pay out of pocket before the health insurance plan pays anything towards the bill
Coinsurance: The proportion of the bill that the insurance will pay, usually between 70-90% of the bill
Copay: A fixed dollar amount that the patient is responsible for per visit or procedure
Premium: The monthly cost to the employee for the health insurance plan
Understanding these terms is critical when choosing a health insurance plan that best suits your needs! Most employers will offer a few different plans for their employees to choose from, often with choices from the following categories: High Deductible Health Plans (HDHP), Preferred Provider Organizations (PPO), or Health Maintenance Organizations (HMO).
PPOs have historically been one of the more common and traditional health plans, with a monthly premium and fixed copays for most services. Many people like these health insurance plans because the costs are relatively easy to predict up front. However, it is important to examine your plan offerings carefully, as the copays can be expensive for specialists, and the monthly premiums are often higher than other offerings.
High Deductible Health Plans (HDHP) have more recently joined the health insurance marketplace. These plans are aptly named for the high deductible, often several thousand dollars, that they require each year. Since the introduction of the Affordable Care Act, many preventative services, annual physicals, and screenings are covered at no charge without requiring you to meet the deductible first. But any illness or injury will likely result in large bills incurred. These plans do require more careful budgeting, as I previously described in the Ultimate Guide to Personal Finance for Physical Therapists, or these health bills might hit you by surprise. But often, HDHPs can end up saving money, as the premiums are much lower.
Another perk of high deductible plans is that you may participate in a Health Savings Account, or HSA, if your employer offers one. Many employers will contribute money to your HSA either at the beginning of the year or every paycheck. HSAs have many advantages, as they are tax-advantaged accounts. Money contributed to a HSA by payroll deduction is not subject to FICA, Medicare, or Federal income taxes, and is not taxed when spent for health, dental, vision, or prescription drug expenses. An HSA can also serve as a secondary retirement vehicle--if you wait to withdraw the money until retirement, the HSA functions much like a traditional IRA. The limit for 2016 contributions is $3350 for a single and $6750 for a family.
Health Maintenance Organizations are a more closely managed form of healthcare, requiring more referrals to see specialists, prior authorizations for certain services, and typically a more limited network of providers.
Let's look at an example of how to choose between two plan offerings: a HDHP with HSA, or a PPO. These numbers are for single coverage, and of course you will have to do your own calculations for family coverage and taking into consideration whatever your employer provides.
For example, consider the following case from my husband's company last year for single coverage:
| PPO | HDHP | |
| Deductible | $750 | $1500 |
| Out of Pocket Max | Medical $3250 | $3500 |
| Coinsurance | 80% | 80% |
| PCP office visit | $25 copay | 80% after deductible |
| Annual Premium | $479.96 | $239.98 |
| HSA contribution | $500 | |
| Total healthcare cost for no visits | $479.96 | $(260.02) profit |
| Total healthcare cost for catastrophic event | $479.96+ $3250 = $3,729.96 |
$3500-$260.02= $3,239.98 |
In this case, the HSA financially makes sense in almost all scenarios. It ends up cheaper when seeking no medical care in a given year, and it also is cheaper for a very high cost year when the max out of pocket costs are reached. And this calculation doesn't even take into consideration the tax savings of using a HSA account! Especially for a young, healthy employee with an emergency fund, this plan is a wise choice. Of course, your employer plan offerings may be different, so it is important to run the numbers for your specific situation.
Employee Benefits: Vision and Dental
Vision and Dental insurance are usually optional products, offered separately from health insurance plans. Dental plans usually cover regular cleanings and exams, and offer discounts on fillings and other more involved dental work. These plans usually don't cover as much as health insurance plans do, so don't expect to have a major dental procedure without any out of pocket cost. It often does makes sense to purchase a dental insurance plan, but as always, make sure to run the numbers for your specific plan while taking into consideration your dental health!
Vision insurance often covers an annual eye exam and offers discounts on glasses and contacts. It's important to check if your health insurance covers eye exams, as you don't need to duplicate coverage. Look closely at the cost of eyewear, as a pair of glasses can cost several hundred dollars even after insurance discounts. You might be better off purchasing your glasses through a retailer like Costco or the numerous online retailers like Warby Parker or Zenni.
Employee Benefits: Flexible Spending Accounts
Flexible Spending Accounts (FSA) can be a good option to save money on taxes if you choose a more traditional PPO plan, as you cannot have both HSA and FSA accounts. These accounts let you pay for health spending tax free, such as copays, glasses and contacts, and prescription medications.
Dependent Care FSAs are also available, and these accounts let you set away $5000 per year towards childcare tax free. These accounts can be a great choice for families with small children, allowing you to save on taxes.
The only downside of flexible spending accounts is that any money over $500 does not indefinitely roll over, like in an HSA. With this in mind, make sure to only contribute the amount that you think you will spend on healthcare or dependent care expenses.
Employee Benefits: Life Insurance
Life insurance is a product that will pay out a lump sum to a designated beneficiary upon your death. Many employers offer a small amount of insurance (approximately equal to your annual salary) at no cost to the employee. Supplemental life insurance is also often available for purchase.
Life insurance is most valuable for those who have family or loved ones who depend on their income. It is especially important for single income households, as the loss of the income provider would be devastating. If you are single without any dependents, life insurance is not as essential.
Employer provided life insurance can be advantageous in that you may be able to obtain more coverage without having to complete a physical examination like you would for a separate term life insurance policy. However, the coverage may not be portable if you leave your job, requiring you to obtain new insurance at potentially higher rates depending on your health status at the time.
Employee Benefits: Disability Insurance
Employer provided disability insurance can be a great employee benefit. However, the coverage provided by employer plans is not usually very comprehensive, as it may only cover a disability for a few years rather than a lifetime. This is one area where it often makes more sense to purchase an individual policy with a good definition of disability: one that covers you if you are unable to perform your own occupation, not just if you are unable to perform any occupation.
Employee Benefits: Retirement Contributions
You can typically change your retirement contributions throughout the year, so you are not limited to open enrollment. However, this is an excellent time of the year to consider whether your retirement contributions and investment choices are on track to meet your goals!
