By Francesca Lunzer Kritz
October 19, 2009
Most important: Don't assume that you can just do nothing. Some firms will drop you if you don't literally sign your name to your 2010 coverage, even if you're just continuing the same options you had last year.
High-deductible plans and health savings accounts
You've heard about these for years -- maybe it's time to check them out. Unlike traditional plans, which often have average deductibles as low as $450, high-deductible plans are likely to have deductibles of $1,500 to $2,000 for individuals and $3,000 to $4,000 for families, but they typically have lower premiums. "If you are healthy and rarely see the doctor and rarely even spend down the $1,000 deductible, why pay more in premiums?" says Tom Billet, a senior consultant in the Stamford, Conn., office of Watson Wyatt, a benefits consulting firm.
Obviously, this option is typically best for younger employees with no health problems who don't anticipate much in medical costs.
Having a high-deductible insurance plan also allows you to start a health savings account, which can be used to pay medical expenses not covered by your insurance plan, either at all or until the deductible kicks in.
Individuals can set aside $3,050 tax-free in 2010; families can set aside $6,150. The money rolls over at the end of the year if you haven't used up the funds.
Some employers even make contributions to health savings accounts, Billet says. Even if they don't, they often have online calculators that help you figure out what you're likely to spend out of pocket with a high-deductible plan.
Best bet: If you aren't doing so already, start keeping track of all your medical expenses -- doctor visits, drugs, flu shots, etc. -- so you can figure out your costs for next year and thus how much money you should put into your health savings account.
Flexible spending accounts
It's easy to confuse FSAs and HSAs. Here's the difference: Where HSAs can be started only by people with high-deductible plans, FSAs can be started by anyone whose employer offers these accounts. (Not all do.) In contrast to HSAs, money not spent by the end of the year is forfeited.
Sara Taylor, health and welfare strategy leader at the benefits consulting firm Hewitt Associates in Lincolnshire, Ill., says many people ignore these accounts -- which typically let you deposit up to $5,000 per year per family pre-tax, for allowed medical expenses. Instead of missing out on the tax savings, find out what you typically spend out of pocket with a calculator from the Principal Financial Group: Go to www.principal.com and type "FSA calculator" into the search engine at the top of the home page. That way, you can put away the right amount.
Your human resources department should have a list of eligible expenses: Keep in mind that nonprescription items such as pain relievers and contact lenses are included.
Here's another thing to remember, Billet says: The full amount you allocate is available to you Jan. 1, even though you'll only just be starting the payroll deductions then. So if you think you could lose your job before 2010 ends, consider spending the full amount soon -- you won't have to pay it back. And if you do get laid off and have not been reimbursed for funds you spent, you can still file to be reimbursed any time before the plan year ends.
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