Navigating employer benefits can be a daunting task — particularly when it comes to health insurance. Should you opt for a plan with a higher deductible to keep your monthly premiums low? Or should you pay more for a lower deductible to keep out-of-pocket costs more manageable? And what about the other types of policies your employer might offer, like short- and long-term disability or life insurance? Are they worth it?
Whether you're approaching open enrollment or recently transitioned to a new job, this guide will walk you through selecting the best employer benefits tailored to your unique financial situation.
When selecting the right health insurance coverage, there are three main things to consider: benefits, cost and choice.
Benefits can vary widely between different health insurance plans, so begin by making a list of medical services you and your family might require, from regular check-ups to specialist visits and medications. Then compare that list to the benefits offered by different plans.
A robust plan typically covers preventative services at no extra cost. This can include routine screenings, vaccinations and annual check-ups. Some plans now offer telehealth services, allowing consultations without visiting a doctor's office.
In addition, different health insurance plans have different formularies — that is, lists of drugs that are (and aren't) included in your plan. If anyone in your family takes a prescription medication regularly, see which plans offer coverage for the medication you take — and how much the copays are for that medication.
Remember that the more a plan covers, the more it will cost.
On average, employees pay $1,637 per year for employer-based health insurance.1 However, costs can be higher if you include your spouse or dependents on your health insurance plan. One of your central cost considerations is the trade-off between deductibles and premiums.
Opting for a higher deductible and lower premium can be a smart choice if you're in good health and don't anticipate significant medical expenses. On the other hand, if you expect frequent doctor visits or have known health concerns, opting for a plan with a higher premium but lower deductible may be more economical in the long run. It ensures you'll pay less out-of-pocket for medical services throughout the year.
If you're leaning toward a high-deductible health plan, consider coupling it with a Health Savings Account (HSA). You make contributions to an HSA on a pre-tax basis,2 meaning they reduce your taxable income. You can use the funds in an HSA for a range of medical expenses, including health insurance premiums, copays, prescription medications and more.
Some healthcare plans limit you to a network of providers, requiring you to pay more out of pocket when visiting providers outside the network.
If you have a preferred doctor, hospital, or specialist, check the list of in-network providers to ensure they're included in the network.
Beyond Health Insurance: Other Key Benefits
While health insurance is often the focal point, don't neglect the other benefits your employer might offer. Some common benefits include:
Short-term or long-term disability. These policies offer protection against loss of income due to a disability. Individuals with significant savings might opt for a longer waiting period before benefits kick in, which can result in lower premiums.
Life insurance. Many employers offer basic life insurance as a benefit. And for the amount of coverage you get, you'll typically get a better rate that buying a policy on your own. That said, the amount of life insurance you can buy through your employer is typically capped at a certain multiple of your salary. For high-net-worth individuals or those with a family, this coverage might be insufficient. Consider supplementing it with a personal policy to protect your loved ones.
Re-evaluate Annually If Your Situation Changes
Remember that what was right for you last year might not be the best fit this year. Whether it's changes in your family size, health conditions, or financial situation, it's always a wise choice to re-evaluate your options annually.
For example, if you recently started a family, you might focus on comprehensive health coverage and life insurance. If you're single, you might prioritize lower premiums and saving for future out-of-pocket expenses.
Selecting the best employer benefits requires balancing your current needs and future priorities. Remember, while it's tempting to stick with the familiar, re-evaluating regularly ensures that you make the most informed choices for your financial well-being and health. When in doubt, seek advice from a financial advisor. They can offer personalized guidance tailored to your unique situation.
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This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information. Diversification does not ensure against loss.
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