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Assembling the Pieces

Open Enrollment Can Be Mind-Boggling, but Examining the Details One at a Time Can Help You Make the Right Choices


When open enrollment season rolls around, Bonnie flips through her employee benefits forms, checking off the same boxes each year. Is that a sign of satisfaction with the choices she's made? Unfortunately, no. Bonnie says it's a signal of her utter confusion.

First there's the medical care alphabet soup, then there's the sheer volume of material to wade through. HMOs, PPOs, EAPs and POS plans baffle with directories the size of phone books and intricate schedules of co-payments and deductibles.

Next she's supposed to weigh life and disability insurance choices. Does she need a "salary continuation plan"? How much life insurance does she want? Would she like to contribute to the dependent care account? Has she adequately planned for retirement by funding her 401(k)?

Bonnie goes home with an armload of reading material and a single conviction: If the answers to her benefit questions lie somewhere in the hundreds of pages of information she carted back from the company's annual benefits fair, she doesn't know where they are and she's not sure they're worth finding.

But if she invested the time to do it right, Bonnie could save thousands of dollars a year--the equivalent of giving herself a tidy raise.

"This is an area that nobody can ignore," says Harold Loeb, principal and consulting actuary at Buck Consultants in Century City. "There's just too much money--and potential exposure--involved."

But as the so-called "open enrollment" season nears--fall is usually the time when companies give workers the chance to rejigger their benefits--many employees, like the hypothetical Bonnie, are confused about just how to do it.

"Benefit by benefit," advises Cynthia Drinkwater, senior director of research at the International Foundation of Employee Benefit Plans in Brookfield, Wis. "It's almost too big a picture to look at on an overall basis."

Consider each benefit you're offered in three steps: Determine how much coverage you have, how much you need and how much your employer will charge you for additional coverage, assuming you have the option to buy more through your company plan.

The best mix of benefits will take into account your age, your family status and the specific needs of you and your family.

For instance, a young worker with a stay-at-home spouse and several small children would want to pay more attention to insurance benefits, particularly life and disability. A top-of-the-line health plan might be nice too, but when dollars are limited--as they always are--this family may determine that the need for income protection supersedes the value of being able to pick and choose their doctors.

Meanwhile, a family with a chronically ill member may spend hours examining the specifics of the health insurance plans offered. Which one covers the services they know they need and which offers access to the best doctors?

A single woman with no dependents might be interested in spending more on retirement savings and far less, if anything, on life insurance.

Once you figure out what type of benefits, in general, make the most sense for you, it pays to understand the two basic types of company plans--flexible and inflexible.

If you have an inflexible plan, you'll be offered a single choice in certain benefit categories, such as health insurance, disability insurance and, perhaps, life insurance. Your employer may or may not require financial contributions from you to participate.

Your decision boils down to whether to accept the benefits you're offered.

In a flexible plan, typically, you have the option to spend the benefit dollars your company gives you on just the benefits you want. For instance, you may be able to opt out of life insurance completely in order to buy more health coverage.

Before you wade into your employee benefits package this year, take a glance through the following primer on the pieces you'll need to solve your own benefits puzzle.

Health Insurance

Health insurance has changed dramatically over the past decade, leaving consumers with a wide array of options.

Traditional health insurance, called "fee for service," allows you to choose any doctor, with the insurance company paying a portion of the cost, often about 80%. These plans were the primary option for most workers a dozen years ago. Today, they're just one of four potential choices.

The other three common types of health insurance plans are lumped under the heading of "managed care." These plans closely supervise care and restrict patients' choice of doctors in an effort to control costs. By and large, there are fewer out-of-pocket costs in a managed-care plan. But dealing with these plans can be more time-consuming because visits to specialists are controlled by the health plan in a sometimes lengthy process.

A handful of managed-care plans allow you to refer yourself to a specialist. But there are numerous restrictions on when and how you can self-refer, says Tim Beck of Buck Consultants.

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