Take time to study benefit programs offered by employer

By Eileen Alt Powell
Associated Press

NEW YORK — With the arrival of fall, many companies flood employee mailboxes with brochures about next year's benefit program offerings, reminding workers that this is the time to select new health insurance and retirement savings options.

It can be confusing, especially when it comes to choosing from a variety of healthcare plans that can range from health management organizations to indemnity insurance. And workers often are asked to review their 401(k) retirement account contribution levels.

While people who work with small companies often have few choices, those at large firms may have dozens of alternatives, said Dallas L. Salisbury, chief executive of the nonprofit Employee Benefit Research Institute in Washington, D.C.

He urges workers to read their enrollment material carefully and get help from their company's human resources department if they don't fully understand their options.

When it comes to deciding on healthcare coverage, "the first thing workers need to do is decide whether they have any reason to anticipate that they'll need to file any claims next year," Salisbury said.

He noted that a single man in good health might have little need for anything but catastrophic coverage, while the mother of three young children may have to worry about kids breaking their arms or needing braces.

"Ideally, try to put a number on it, perhaps based on claims experience this year," he said.

Next, Salisbury advised, look at which programs cover the medical services the workers think they'll need most.

The most common health plans are health maintenance organizations, which require workers to use doctors and hospitals within the HMO network, and preferred provider organizations, which often include a larger number of doctors and hospitals than HMOs but require co-payments for medical visits and higher fees for services from physicians outside the network.

Some companies also offer indemnity plans, which reimburse participants after medical expenses are incurred.

"Where it gets tricky is comparing costs," Salisbury said. "One plan may have a low premium, but require big deductibles and high co-pays. ... Another, with lower deductibles and lower co-pays but a higher premium, may be the better option."

Many companies have set up Web sites that can help workers weigh their decisions. There also are Internet tools, such as the new Web site www.planforyourhealth.com, created by the Financial Planning Association, a Denver-based professional group, and the Aetna insurance company.

Dr. Charles M. Cutler, national medical director for quality at Aetna, said a recent survey found that many workers don't understand the healthcare options available to them and don't want to invest a lot of time making those choices. One of the biggest challenges is that a family's insurance requirements change over time.

"Getting married, getting divorced, having a child or other changes in your family life could cause you to need to make different choices," Cutler said.

The new Web site helps people work through health care alternatives, including a "wizard" to evaluate various plans and an expense calculator.

In addition to choosing a health plan, workers may be asked whether they want to set up tax-advantaged accounts to pay for health expenses not covered by their insurance, said attorney Tulay Turan, a benefits law analyst with CCH Inc. in Riverwoods, Ill., which provides tax information and services.

The most common are flexible spending accounts, which employees fund through pretax deductions from their paychecks.

Turan said these are especially useful for families "when you know you're going to have expenses not covered by your plan — say eyeglasses or hearing exams — or you know you're having some procedures coming up that will require a number of medical co-pays."

Workers need to be careful how much money they set aside in FSA accounts, however, because they'll lose any money they haven't used at the end of the year.

Many employers also encourage workers to make retirement savings decisions during what's known as open enrollment season.

Lori Lucas, director of participant research at Hewitt Associates, a human resources consulting firm headquartered in Lincolnshire, Ill., pointed out that some companies try to get workers to review their 401(k) retirement accounts each fall.

Plans like the 401(k) let workers set aside pretax money in special accounts; earnings grow tax-deferred until needed for retirement. Many employers match a portion of a worker's contribution.

"Open enrollment is a good time for workers to make sure they're contributing enough," Lucas said. "Just enough to get the match may not be enough to reach your retirement goals."

She noted that many 401(k) plans come with online tools to help workers project retirement needs, and some allow workers to program contribution increases, say a 2 percentage point contribution increase in January when merit raises are made.