By Steve Jacobs
When it comes time to sign up for health care at a new job, we’re usually so excited we don’t give the options our full attention. And then every year when the enrollment period rolls around, many of us just check the boxes and continue our coverage as is.
We’ll break down what some of those benefits are, what they mean for you and, most importantly, what you might be missing by not giving full attention to your choices.
Major Medical Coverage
Most people have a decent understanding of this. We’re not going to go into the difference between the types of plans (you can find a loose description here). Instead, we’ll discuss how major medical coverage is moving more toward high-deductible health care plans (HDHP).
Many employer-based plans are moving toward HDHP for risk-reduction purposes. What this means is you could have a deductible of several thousand dollars and a similarly high out-of-pocket threshold, and your insurance wouldn’t kick in until both of these are met.
Obviously, this type of plan can be a double-edged sword. It’s less expensive, so you get more in your paycheck each month, but you end up paying more if anything happens. According to CERTIFIED FINANCIAL PLANNERTM practitioner and USAA advice director Sean Scaturro, “This means you can save more, but the risk for someone who doesn’t plan can be that much more substantial.”
Planning, then, becomes essential. If you’re covered by an HDHP, you must understand what’s being covered and what your financial responsibility is for premiums, deductibles and co-pays. Knowing this helps you budget so you’re prepared for whatever happens.
If you’re looking to keep a budget, you might want to take it one step further and consider another option that’s been showing up lately: a health savings account (HSA). What is an HSA? It’s an account you contribute to each year, generally pretax through an employer, with funds earmarked specifically for health expenses such as deductibles and co-pays.
If this sounds like a flexible spending account (FSA), that’s because they’re very similar. The key difference is that your HSA balance rolls over from year to year, so you don’t need to do a last-minute scramble to spend that money before January comes around.
Some people like the level of personal freedom an HSA allows when it comes to their health spending. Others prefer their employer to just take care of it. It’s entirely personal. According to Scaturro, the important thing to know is, “Number 1, what’s covered; number 2, what are you financially responsible for; and last, what options you have when it comes to 1 and 2.”
Dental and vision plans are typically high use. If this describes your situation, then the cost of paying out of pocket far outweighs the cost of adding these plans. As Scaturro notes, a 37-year-old male in Texas who's a nonsmoker would pay an average cost of $30 per month for a dental plan. By self-insuring and scheduing the recommended number of visits to the dentist, his out-of-pocket costs may be about $400 a year just for maintenance. Tack on unexpected expenses, where costs could be upward of $1,000, and it all makes sense.
It’s the same with vision, he says. Using the same 37-year-old Texan, roughly $23 a month comes out to less than $300 a year, as opposed to $1,000 or more for glasses and eye care without insurance.
If you have kids, signing up for these plans is an easy decision. Again, according to Scaturro, “The amount of people on your plan is going to increase the probability that you will need to use the insurance.”
With these plans, ask yourself a simple question: “Would I rather save the money each month and hope nothing happens, or be covered in case something does?” For most people, it’s the latter.
Other Types of Insurance
Then there are the other categories: short-term disability, long-term disability, life insurance and the like.
Workers typically use short-term disability more often than long-term disability, so those plans are priced accordingly. Typically, short-term coverage is for an injury that prevents you from working after a qualifying event. It supplements your income while you try to recover and isn’t for a permanent change of lifestyle. Many employers provide short-term with no cost to the employee, and this makes sense: They want you to get back to work as soon as possible.
Long-term care plans are starting to show up, but they’re not that common yet. For that reason, many employees tend to prioritize short-term disability.
Group life insurance is usually employer-paid up to a certain amount, typically a multiple of your salary. There’s often a potential to get additional coverage you pay for with limited underwriting.
However, group life insurance shouldn’t be your primary coverage for protecting your loved ones — after all, people are changing employers with increasing frequency, and the benefits usually don’t move with you. Your next employer might not have the same level of coverage, so get a plan you own personally, one that travels with you.
If you have any further questions about your coverage, we recommend reaching out to your benefits coordinator or HR representative. They’ll be able to give you a clear picture of what you’re being offered.
Learn more about our health insurance coverage that's personalized to your needs.
Health insurance solutions provided through USAA Life General Agency, Inc. (LGA) (known in CA and NY as USAA Health and Life Insurance Agency), which acts as an agent for select insurance companies to provide products to USAA members. LGA representatives are salaried and receive no commissions. However, LGA receives compensation from those companies, which may be based on the total quantity and quality of insurance coverage purchased through LGA. Plans not available in all states. Each company has sole financial responsibility for its own products.
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