Tess Vigeland: Take a deep breath. The smell of fall is in the air. Apple cider and pie. Wet leaves. Open enrollment.
OK, OK, so that doesn't smell. But some employees are already getting a whiff of it as the season of picking benefit plans swings into gear. If you're not exactly looking forward to going through health plans, there are ways to streamline the process and save some money.
Kimberly Lankford is here to tell us about those. She's with Kiplinger's Personal Finance and wrote about open enrollment recently. Welcome back to the show
Kimberly Lankford: Thanks for having me.
Vigeland: So 2014, is believe it or not, is just around the corner, which of course is the year that the Health Reform Act is set to take effect. Are we going to see any changes during open enrollment in anticipation of that overhaul?
Lankford: Well the changes are much more incremental. Last year for example, the children up to age 26 could be covered by their parents' policy and also most plans had to start covering preventive benefits no matter what size deductible you had, which helped a lot of people last year. Added a little bit to the cost overall, but most of the things are gradual that you'll see in the next few years.
Vigeland: OK. Well one thing that never seems to be gradual is that costs just keep going up and up and up. And certainly continue to do so. Where are consumers likely to feel that pinch this year?
Lankford: Well, you'll feel it in a bunch of different places. First of all in premiums. Kaiser Family Foundation came out with their numbers for the increases over 2011 and its' a 9 percent increase over the previous year. So the total cost of family coverage is $15,073 on average.
Lankford: Yeah. And for employee-only coverage is $5,429. Now, the interesting thing is employees continue to get a lot of subsidy from their employer. But they are starting to pay more, and especially for the family coverage. But, for large firms, a lot of them are providing a much bigger subsidy for the families than the small employers are. So if one spouse works for a large firm, another spouse works for a small firm, take a look at what those overall costs are for your family, 'cause it could be vast differences depending on what they're charging for the rest of their family.
Vigeland: It really pays to compare those plans then sit down, perhaps have a financial date night to do that.
Lankford: Exactly, and this fall, that's the key thing to do. The other important thing to look at is the other out-of-pocket expenses that you have. One thing that a lot of employers are doing is switching from fixed-dollar co-pays to percentage co-insurance rates. So instead of paying $10 or $20 for each doctor's visit, you're starting to have to pay 20 percent for preferred doctors, 30 percent for non-preferred doctors. And if your doctor charges a lot, you're going to be paying a lot more out of your pocket than you have been in the past. So that's kind of a hidden way that a lot of employers are increasing the costs.
Another key thing is you may be offered life insurance through your employer, which can be a great deal if you have medical conditions. Because a lot of times, they'll give you a set amount for free and they'll let you buy extra coverage on your own, which can be great -- it can help you think about the need for extra coverage. But if you're healthy, you may be able to find a better deal on your own for buying your own life insurance, rather than just adding on that extra coverage through your employer.
Vigeland: You know, any time I hear someone talk about making a choice of whether to prepare for catastrophic coverage, I'd like to see the person who can actually predict that they're gonna be in a catastrophe, right?
Lankford: And that's the reason you have insurance -- you have no idea what's going to happen to your health. So, it is really important if you have a high deductible plan, for example, have a plan for where that money's going to come from, if you happen to have that many medical expenses. The one good thing is as more employers are offering high-deductible plans, they're keeping those premiums pretty low, it can be a good deal. And they're also helping to contribute money to people's health savings accounts. And that can be great. Be sure to contribute as much as you can afford to a health savings account if you have a high-deductible plan. Because it gives you a triple tax benefit: The money goes in, pre-tax; the money grows tax-deferred and then you can use it tax-free for your medical expenses. And if you don't, if you're healthy, that money can grow for the future. You can use it in any year; it's not "use it or lost it," like FSAs.
Vigeland: And FSAs, of course, being a flexible spending account.
Lankford: Also look at any exclusions and your total out-of-pocket expenses that you could pay for the coverage maximum. So know if you do end up needing more care, you won't be trapped. And any of those tools can really help, 'cause right now it is just so difficult to compare. Sometimes it looks apples to oranges.
Vigeland: Exactly. Math is fun!
Lankford: Math is important during open enrollment.
Vigeland: Kimberly Lankford is a contributing editor for Kiplinger's Personal Finance magazine. Thank you so much for coming in.
Lankford: Thank you for having me.