When many of us think about what our job provides, we immediately think of a salary. It's the most obvious form of compensation. It's a number that is added to our bank accounts each month. It's easy to add up, and easy to compare to other jobs, people, and opportunities. But, it is only one small part of your employment benefits. The political climate in the past decade has placed a spotlight on health insurance, and costs associated with it. This is becoming a very critical part of any employee benefit program. Whether you are searching for new job, or secure in the one you have, it's important to understand your health benefits, so that you are getting the most from them.
When you get hired on by a company that offers employee benefits, you undoubtedly want to understand all that is being offered. Understanding the benefits begins by understanding the terminology used in your employee benefits package. After all, how can one comprehend what is being offered, if they don't understand the terms used in the fine print? You can't, therefore it is so important to get familiar with insurance jargon before you select a coverage plan. Even if you come across a section that you don't think applies to you, please read through all the fine print and familiarize yourself with any jargon hard to understand.
Three of the most important insurance terms to be familiar with are outlined below:
Premium: This is the amount of money paid (often monthly) to maintain insurance coverage. Think of it like a monthly gym membership.
Deductible: This is the amount of money paid out of pocket before insurance coverage kicks in. Please note that the money paid for your premium cannot be used toward the deductible.
Copay: Regardless of how much money paid toward your deductible, you will always be responsible for copays. Good news, is that some insurance plans have extremely low copays. In fact, some come with $0 copays.
Understanding insurance jargon is of the utmost value because it will help assess your financial decisions and choose the best ones possible. For example, many feel enticed to purchase an insurance plan that has a low premium, but have they looked at its deductible? Many may find low premiums, because they have an outrageous deductible. So, even if you sign up for a plan that looks like it is going to save you money, you very well may find you must empty your entire bank account for the deductible before coverage kicks in.
One of the wisest choices you will make when it comes to understanding your employee benefits is to ask questions. Open enrollment can seem very overwhelming, especially when you go at it alone. Fortunately, you don't have to. The employer should provide one or more workers that can help answer any questions you may have about benefits. Sure, this might mean staying for an extra 30 minutes and meeting with the HR department, but the answers received will be well worth the time. If your company happens to not have someone onsite who can answer questions about employee benefits, ask your supervisor to have an expert from the outside come in and speak with you. Most employers will be more than happy to have an expert come in and meet with the employees.
Flexible spending accounts (FSAs) can save people a large amount of money each year, but only if they use them appropriately. This type of account, which allows you to set aside pre-taxed money to be spent on medical and child care expenses, can lower the overall amount of money you pay in taxes. Keep in mind, though, that if you allocate too much money to this account (more than what you will spend in a year's time), you lose the money and don't get it back. Also, once you choose an amount to have set aside in this account, you can't go back and change it unless you experience a qualifying life event, such as getting married or having a child.
You work very hard for your employer, and the benefits they provide are a reward, so it's important to make sure those benefits are working hard for you in return.
Prepared by Gary Scheer in conjunction with Fusion Capital Management.