The Finance Buff

Open Enrollment is coming up next week. This is a period of time when you can make choices for your benefit plans for next year. In a previous job, I worked in the employee benefits department at a Fortune 100 company. So I know a thing or two about these benefits. Over the next few days I’m going to write about my choices. Please note the benefits and premiums vary greatly from employer to employer. I’m writing from a perspective of an employee working for a large company with comprehensive and heavily subsidized benefits.

The first post in the series is about health insurance — medical, dental and vision. If you’d like to jump ahead, here are the follow up posts in this series:

• Open Enrollment, Part 2: Life Insurance and AD&D
• Open Enrollment, Part 3: Disability Insurance
• Open Enrollment, Part 4: Flexible Spending Account

1. Medical

This is the most important benefit the employee receives. I have a choice between PPO and HMO. A PPO allows the employee to go to any doctor in the network without a referral. If you see a doctor out of the network, there’s still a reduced level of benefit. A HMO is an exclusive network. You must choose a Primary Care Physician (PCP) and you can’t go to a specialist directly without first getting a referral from your PCP.

PPO is more flexible but costs more to the employee and the employer. HMO also provides higher level of benefits and lower or no annual deductible and lower co-pay. For example the PPO plan will cost me $25 per pay period (every two weeks). It covers diagnostic services at 90%, has a $500 annual deductible, and $20 co-pay for doctor’s visits. The HMO plan will cost me $20 per pay period. It covers diagnostic services at 100%, has no deductible, and $15 co-pay for doctor’s visits.

For me, I always chose PPO because I like the flexibility. The employer is usually motivated to move the employees from the more costly PPO to HMO. But I don’t want to cut any corners with regard to my health care in order to save my employer some money. It will cost me a little more in terms of employee contributions, annual deductible and co-pays, but all those are pre-tax money when I use money from a Health Care Flexible Spending Account. I will write more on Flexible Spending Accounts in a future post.

After searching for other blogs on this topic, I can see that One Frugal Girl agreed with me and Daniel at My Money Path disagreed.

2. Dental

Dental insurance technically isn’t much insurance because the annual payout is typically capped at $1,500-2,000. It’s still valuable. Usually the plan offers different coverage level for preventive, basic, and major care. If you have bad teeth, be prepared to save more money in the Flexible Spending Account, because one root canal plus one crown can easily exceed the annual insurance cap. Plus you will have to save for the co-pays.

My company only offers one plan. I chose it. Premium is pretty low at $5 per pay period.

3. Vision

Vision care covers eye exam, lens, and frame. There is also some coverage for contacts. Some plans give discounts to laser eye surgery.

My company only offers one plan. Premium is even lower than Dental. I chose it.

More to come on life Insurance, AD&D, disability insurance, Flexible Spending Account … …