Open Enrollment

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Open Enrollment

Jacques Chambers, CLU, Benefits Consultant

We are approaching the time of year when many companies allow their employees to make changes in their benefits package for the coming plan year. This period for making changes usually lasts for a month and is called the Open Enrollment Period. The federal government, for some mysterious reason, chooses to call it “Open Season” for federal employees.

In many cases, rules and limits on enrollment are set aside during this period and employees are allowed to make changes in their health insurance, their dependent enrollment, and many even allow changes in the amount of insurance carried by the employer.

Companies offering Open Enrollment publish (or offer online) an Open Enrollment Guide that spells out the options and opportunities to make changes. For persons dealing with a serious medical condition like HCV, it can be an opportunity to alter benefits. Saving health insurance for last, let’s look at some of the possible changes:

Life Insurance. Persons dealing with HCV would have great difficulty purchasing additional life insurance because of their medical condition. However, some employers will offer an opportunity to increase the amount of life insurance an employee purchases without proof of health.

Many employers provide each employee with a basic amount of life insurance, often one or two times their annual salary. The also offer additional Supplemental Life Insurance, low cost term life insurance that the employee can purchase through payroll deduction.

Many companies lock in the amount that the employee purchases when first enrolling and don’t permit changes without proof of good health. But other employers will offer the employees a chance to move their life insurance benefit up one level without medical underwriting at each Open Enrollment period.

For example, an employer offers you Supplemental Life Insurance in $20,000 increments. When you first enroll in the benefits plan, you purchase 2 increments ($40,000) in Supplemental Life Insurance. At Open Enrollment, you would be able to purchase an additional $20,000 bringing the total of your Supplemental Life up to $60,000.

It is important to carefully read your Open Enrollment material. While many employers offer this option, others will not. If, however, it is available it is an excellent way for an “uninsurable” person to obtain additional life insurance.

Long Term Disability. Less common, but still occasionally available, is the opportunity to increase the benefit of your LTD plan. Some employers will provide a basic benefit for LTD, such as 50% or 60% of your monthly earnings, and allow employees to purchase an additional 10% or 15% to raise the benefit you would receive in the event of disability.

Some employers may allow you to add this benefit if you did not originally. Again, it is important to read your Open Enrollment material to see if your employer offers this.

Revising LTD Premium Payment. One further possibility to explore is the payment of LTD benefits. Some employers will allow you to pay for the LTD coverage through payroll deduction rather than receiving it as a gift. If this is possible you may want to jump at the chance, the reason being taxes.

If you pay for the LTD coverage with money you earn and pay taxes on, then the benefits you receive if you become disabled will be income tax free, substantially increasing the spendable dollars you would receive as a disability benefit. Conversely, if the employer “gives” you LTD coverage and pays for it, then any benefits you would receive upon disability are fully taxable.

Health Related Benefits. Many employers, especially larger ones, offer a variety of health, dental, and vision plans that employees choose from. At Open Enrollment, you have the opportunity to change your coverage from one plan to another regardless of your medical condition, and sometimes have the opportunity to make choices within your plan, such as increase or decrease the size of the deductible.

For someone dealing with HCV, this can be an important choice, especially if this is the first Open Enrollment since diagnosis. There is no one plan that is best for everyone, but a brief review of the different types of plans may help you decide which would be best for you:

Preferred Provider Organization Plan (PPO). These plans will allow you to choose your own medical providers and decide for yourself when and what specialist you will see. PPO plans pay more if you go to one of their contracting, or “in-network,” providers, but some benefits are available if you go “out-of-network.” The price for this increased flexibility of choice is that the premiums are higher than other health plans, and the amount of money you will pay out of your pocket will be higher, especially if using out-of-network providers.

It is important that you review the drug coverage of these plans as many will require you to pay 20% or more of the cost of prescription medication, which can be burdensome, given the high price of medications today.

The PPO plan is the closest plan currently in use that is similar to the old Indemnity Plans which used to pay the same benefit regardless of which provider was used. Indemnity Plans are virtually non-existent today.

Health Maintenance Organization (HMO). These plans require you to get all your medical care (except emergency care) through their network of providers. They also require you obtain a referral from your Primary Care Physician (appropriately called the Gatekeeper) in order to see a specialist or obtain diagnostic testing.

The advantage to these plans is that the premiums are less than PPO plans, and by paying copays instead of a percentage of the charge, your out-of-pocket expenses are substantially reduced. Again, check the drug benefit. Usually there will be copays. The trend is to dramatically increase the size of the copay for brand name drugs to $25, $35, or even $50 in an effort to encourage use of generics when available.

The lack of choice in medical providers does not make an HMO necessarily a bad choice. See “Surviving HCV in an HMO” in the archives of this site.

Flexible Spending Accounts (FSA). These accounts are very common, not only with large groups but with medium-sized employers as well. They are an excellent way to reduce your out-of-pocket expenses through the tax savings they provide.

At the beginning of the year, you determine how much you will be spending out of your pocket for deductibles, copays, or co-insurance. Medically related items that are not covered under regular insurance, such as cosmetic surgery, laser eye surgery, or other non-covered procedures, may be paid for out of this fund as well. Based on that estimate you agree to set aside a certain amount from each paycheck which is then deposited in your FSA. The advantage is that money set aside in an FSA is not subject to income taxes or regular payroll taxes. This means that, if you are in a 25% income tax bracket, the federal government, by not collecting taxes, is, letting you have $1.25 to spend on medical bills for each dollar you set aside in the FSA.

However, nothing is perfect. Any money left in the FSA at the end of the year is lost. Therefore, it is important that you estimate your medical expenditures carefully, and set aside a conservative amount that you know will be spent during the coming year.

Dental and Vision Plans. With dental and vision benefits, if there is a choice of plans it is often between an HMO style plan which offers broader benefits for less out-of-pocket expense, but requires you to use a “contracting” provider, or an indemnity plan which allows you to go to any provider, but will require you to pay more out of your pocket. Based on the cost, expected usage, and list of providers, you can decide which is best for you and your family.

Rising Health Care and Health Insurance Costs. Employers are increasingly worried about the rise in health insurance costs and are looking to reduce their expenses. Premiums for health insurance are rising dramatically, more of which is being passed on to employees. One estimate says that in 2004, while employers will see their expenditures increase by about 12.6%, employee contributions to premiums will rise by 23% during the same period.

Consumer Driven Health Plans. One option that many employers are exploring is “Consumer Driven Health Plans.” This is really just a marketable title for health insurance plans that pass more of the costs of medical care onto the employee.

These are health insurance plans in which the deductibles and copays are raised. Insurance companies maintain that medical costs will be more effectively controlled by the patients if they have a stronger financial interest in making sure they are not over-treated. Such a concept makes a certain amount of sense when talking about a relatively healthy family that may only occasionally require medical care for minor issues.

However, this concept severely penalizes the seriously ill who must have frequent and extensive medical care. If you are dealing with HCV, this may be one type of plan you might wish to avoid, if possible.

Health Reimbursement Arrangements (HRA). This is one of the newest health plans to attempt to provide health benefits while attempting to control costs. In many ways, it appears to combine the Flexible Spending Accounts (FSA) with the Consumer Driven Health Plan, yet it is a totally different product.

Under these plans an employer provides a health insurance plan for employees and their families, but with a high deductible such as $3,000 or $5,000 per year. At the beginning of each plan year, the employer deposits a specific amount of money into each employee’s Reimbursement Account. The amount deposited may be several thousand dollars, but it intentionally is not enough to cover the entire deductible of the health insurance plan that overlays it. Unlike FSA’s, however, any money remaining in the fund at the end of the year can be carried over to future years.

The fund is available to handle routine or initial medical costs. In a healthy person, it would probably be enough to provide all their medical care for the year. If the fund is depleted, then the insured person must pay their own medical bills until the total of medical bills for the year exceed the deductible of the insurance policy after which the bills will be paid, usually in full, by the insurance company. Not very common yet, it is being touted by the insurance industry as an effective alternate to ever increasing premiums, and the IRS has given impetus to this plan through revised regulations.

It will take some time and work on your part to carefully read the Open Enrollment literature and determine your specific needs; however, Open Enrollment can provide an excellent opportunity to fine tune your benefits package in order to provide maximum assistance based on your family and medical needs.

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[Jacques Chambers, CLU, and his company, Chambers Benefits Consulting, have over 35 years of experience in health, life and disability insurance and Social Security disability benefits. For the past twelve years, he has been assisting people with their rights, problems, and other issues concerning benefits and disability. He can be reached at jacques@helpwithbenefits.com or through his website at: http://www.helpwithbenefits.com.]

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