Fall is open enrollment at workplaces for millions of Americans, meaning it’s again time to choose benefits for the next year.
The benefits landscape changes annually as employers try to attract and retain employees and the needs and desires of those workers change. In 2017, 32% of employers reported an increase in overall benefits over the previous 12 months, according to the Society for Human Resources Management’s annual benefits survey. Wellness benefits such as activity programs and standing desks had the highest increase, followed by health benefits such as insurance plans.
Here’s a closer look at common benefits and how to make the best selection for 2018 during the upcoming enrollment period.
The cost of employer health insurance has risen every year since at least 1999, according to data from the Kaiser Family Foundation, a nonprofit that conducts health care research. In recent years, increases have been less dramatic — a 3% to 4% annual increase since 2012 — than in the early 2000s, when premiums frequently rose more than 9% each year.
But costs are still rising faster than workers’ pay, according to the Kaiser data, and it’s not just premiums. At open enrollment, most employees see “their copayments go up, their deductibles go up. They’re seeing something taken away,” says John Young, a senior vice president at Alegeus, a benefits technology and services company.
Your employer likely will offer just a few health plans to choose from. To make the best choice, Young has these tips:
- Familiarize yourself with what deductibles, copayments and coinsurance mean, and what’s included in your current plan, before it’s time to choose for the next year
- Compare this year’s offerings with last year’s. They may be similar, but check the costs for doctor’s office visits and any other services you use frequently.
- If your employer offers a tool or software to help you choose a plan, use it
- Write down questions to ask your benefits manager before the open enrollment period is over
Your employer may offer you any of these three types of nonretirement accounts:
- Flexible spending account, or FSA
- Health savings account, or HSA
- Health reimbursement arrangement, or HRA
FSAs and HSAs are called tax-advantaged accounts because any money you add comes from your paycheck before taxes, and you don’t pay taxes to withdraw funds.
Employer-offered spending accounts
|Account||Funds come from...||Rules of the account||How many employers offered in 2017?|
|Source: NerdWallet research|
|Dependent care flexible spending arrangement (FSA)||Your employer or your paycheck; pretax||Can be spent only on child-care-related expenses for children under 13. Tuition and overnight camps are excluded, as are payments to older dependent children to care for younger ones.||67%|
|Health care FSA||Your employer or your paycheck; pretax||Can be spent only on health care expenses, except premiums. You may lose any unspent money at the end of the plan year.||65% and declining|
|Health reimbursement arrangement (HRA)||Your employer only||Can be spent only on health care expenses. Your employer can restrict the types of expenses and decide if you lose or keep unspent money the following year.||20%|
|Health savings account (HSA)||Your employer or your paycheck; pretax||Unspent money won't be lost and can be invested in stocks or mutual funds. You must be enrolled in a qualifying high-deductible health care plan. You can use the money for non-health-care expenses after you turn 65.||55% and rising|
Many employers offer an FSA and HSA in conjunction with a qualifying high-deductible health plan, which often is the cheapest type of plan available and best for people with few medical expenses. Typically, you can enroll in only one of these accounts.
If you go with a high-deductible health plan, it makes sense to choose an HSA because it has better tax benefits and you won’t risk losing unspent money.
However, you may need a plan that covers more expenses or has a lower deductible if you take prescription medications, see a specialist or have any regular medical expenses. In that case, it generally is better to choose a richer health plan and an FSA, because if you have regular medical expenses, you likely will have to pay far more out-of-pocket expenses with the high-deductible health plan that goes with an HSA.
Having life insurance is helpful if you have people depending on you financially. Many employers offer life insurance coverage at a lower rate than you could get on your own, with a payout of one to two times your regular salary upon death for as long as you’re employed.
Most people who need life insurance, however, need more coverage than what’s offered at work, though the exact amount may differ. Also, your employer can drop that benefit at any time, says Marvin Feldman, president and CEO of Life Happens, an insurance industry organization. His advice is to research your needs and “get an individual policy that you personally own to make sure your family and loved ones are taken care of if something happens to you.”
Vision and dental insurance
This year, 96% of employers offered dental insurance and 88% offered vision insurance. Routine dental care costs are high enough that the total dental premium likely will pay for itself.
If you don’t need vision correction, you might want to opt out of that insurance if your employer contributes little or nothing to your premiums. An eye exam costs about $200 for a new patient, on average, and if you have healthy eyes, you need one only every two years, so buying vision insurance may not always be worth the cost.
Other types of insurance
While enrolling online and after choosing your regular benefits, you may have noticed a handful of extra insurance policies offered. You may have even added the extras if they cost little and seem like an extra safety net, which they are. Though you likely will never use many of the optional policies, disability and long-term care insurance are often worth the cost.
Here are the most popular types of extras:
- Accidental death and dismemberment: Pays if an unforeseen accident causes you to lose sight, hearing, limbs or your life
- Long-term disability: Pays for lost income, up to a certain limit, if you are permanently disabled
- Short-term disability: Pays for lost income, up to a certain limit, if you become disabled but can recover and return to work afterward
- Critical illness: Pays you a one-time lump sum if you are diagnosed with a covered disease, including a heart attack, stroke or cancer
- Hospital indemnity: Pays you a lump sum if you’re hospitalized
- Long-term care: Pays for nursing homes, in-home care and other services for adults over 65 or those with a chronic, debilitating condition
- Supplemental accident: Pays a certain amount if you are injured in an accident, depending on the scope of treatment and nature of the accident