Editor's note: This story has been updated in 2011.
What decisions do I need to make during my employer’s open-enrollment period this fall?
Here are five ways to consider when selecting your 2012 options.
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1. Pick the best deal in health insurance. Health-care-reform changes and ever-increasing health-care expenses are prompting most employers to boost premiums, co-payments and deductibles for their health-insurance plans in 2012. If you have several plan options, the one you picked in the past may no longer be your best choice.
It’s important to compare premiums, but you also need to add up your potential out-of-pocket costs for each plan. For example, if you take a lot of medications with high co-payments, the plan with the lowest premium may actually cost you more in the long run. Many employers are steering employees toward high-deductible health-insurance policies as a way to encourage them to pay closer attention to their medical expenses. As an incentive, some are offering competitive premiums and contributing to employees’ health savings accounts, which give employees tax-free savings to use for medical expenses at any time. Many employers offer tools on their intranet sites to help you run the numbers for your plan options.
If both spouses have health-insurance coverage through work, it’s important to compare the overall costs of both policies again. Some employers are charging more to cover dependents than other employers are, so you could come out ahead by switching your children from one spouse’s policy to the other’s. And if your spouse’s employer has boosted premiums significantly but your coverage has remained fairly stable, then you might do best by having the whole family -- including your spouse -- on your employer’s plan.
See Expect to Pay More for Health Coverage Through Work for more information about what changes to expect.
2. Add grown kids to your health-insurance policy. As a result of health-care reform, you can add adult children up to age 26 to your health-insurance coverage, even if they had aged off the policy in the past. And a child can be covered under your plan even if he or she doesn’t live at home, isn’t your dependent for tax purposes and is married. You need to add your child during open-enrollment season for coverage to begin the next plan year (generally January 1).
If your employer charges one rate for family coverage and you already have younger children on your policy, you might not have to pay extra to add your older child. But if your employer charges separately for each dependent, it might be cheaper to get your adult child a policy of his or her own. Healthy adults in their twenties can usually buy a policy for less than $100 a month.
For more information about adding your adult children to your policy, see Health Insurance for Adult Children.
3. Make the most of flexible spending accounts. FSAs can help lower your taxable income and give you tax-free funds to pay out-of-pocket medical expenses throughout the year. Starting in 2013, the maximum amount employees can stash in a medical FSA will be capped at $2,500 per year. Currently the maximum limit varies by plan, but many employers allow employees to set aside $4,000 or more in these pretax accounts for medical expenses. In light of the impending change, find out how you can make the most of your FSA in 2012.
4. Get tax-free money for child care. Many employers also let you set aside up to $5,000 in a dependent-care flexible spending account, which gives you tax-free money to use for dependent care for children under age 13. Before you sign up for your employer’s dependent-care flex plan, though, it’s important to calculate whether or not you’ll come out ahead by using the money from the FSA for those costs or claiming the child-care credit on your taxes. See FSA or Child-Care Credit? for more information about who qualifies for these benefits, how to calculate which is a better option for your family, and a strategies to help you take advantage of both the FSA and some of the child-care credit if you have two or more kids.
5. Benefit from special deals on other insurance coverage. You may also be given the choice during open-enrollment season to buy extra life insurance, disability insurance and long-term-care insurance beyond any coverage already provided by your employer. You usually have to pay for this extra coverage yourself, but you could benefit from a group discount. However, the quality of these deals can vary a lot, depending on the type of insurance.
First, calculate whether you need extra disability insurance to fill any gaps in your employer’s plan. Many employers offer a limited amount of disability insurance to their employees as a free employee benefit. But these policies generally cover just 60% of your base pay (not counting any bonuses) and your pretax monthly benefit may be capped at $5,000 to $10,000. If this isn’t enough to cover your bills, consider buying extra coverage through your employer.
You can generally get a good deal on this extra coverage during open-enrollment season, and you can keep the insurance if you leave your job or start your own business, when it often becomes much more difficult to qualify for new coverage. Also, when you pay the premiums yourself, you won’t have to pay taxes on the benefits.
Your employer may offer long-term-care coverage during open-enrollment, too. In most cases, employees have to pay the full premium themselves, but they’ll generally get a group discount of 5% to 10%. These group policies tend to be a better deal than they had been in the past, often offering good-health and spousal discounts. But it’s a good idea to compare the cost against the cost of buying a policy on your own. See New Ways to Pay for Long-Term Care for more information about shopping for a long-term-care policy.
Your employer may also let you buy extra life insurance during open-enrollment period, too, to supplement any free coverage you currently get as an employee benefit. It may be a good idea to get extra life-insurance coverage, especially because employer-paid policies usually provide less coverage than most people need and the coverage disappears if you leave your job. Note that if you’re healthy, you may be able to find a better deal on your own. However, buying the extra coverage through your employer could be a good option if you have any health issues that otherwise make you uninsurable. See 4 Ways to Save Money on Life Insurance for more information about shopping for a policy.
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