Money in the Middle

Health insurance open enrollment season will be upon us soon.  If you are working and have health care benefits, tempting as it is to set aside the “big envelope” with your 2010 health care insurance choices, take some time to look at plan changes.  Look at the premium, but also the out-of-pocket costs you’ll be responsible for in 2010.

 Employers are looking for ways to control costs so you may not see big differences in costs, but that doesn’t mean the plan is the same.  Here are some benefits switches to watch for as you calculate what’s the best plan for you and your famil, according to research company the Segal Group: 

• reduced coverage for some brand name drugs/classes of drugs
• reduced copayments for primary care visits,
• increased copayments for visits to specialists
• reduced copayments for certain preventative screenings/tests
• financial rewards or penalties for wellness and disease management program results
• mental health benefits – a new law may require your plan to upgrade its mental health benefits

 MetLife suggests that workers consider the following tips when making their benefits choices this year:

• Take time to do your homework: Make sure you thoroughly research which employee benefits are right for you. The benefits you select for the coming year can have a significant impact on your family’s finances.
• Read the proverbial “big envelope,” use online tools: When employees understand their benefits, they make better choices and tend to be more satisfied by and confident in the open enrollment process. Therefore, it’s important for you to read your company’s open enrollment materials from cover-to-cover. Many companies also encourage workers to read about their benefits offerings online, and some even offer web-based calculators and tools.
• Consider making some changes each year: Very few people have the same benefits needs year-after-year. The fall open enrollment period is an opportunity to reevaluate your options and make changes. Make sure you consider changes or coverage increases, particularly if you’ve experienced a recent life event, such as getting married, having a baby or purchasing a home.
• Don’t assume that a challenging economy means you’ll have fewer benefits choices: Most employers are planning to maintain – and some are even planning to expand – the breadth of their benefits offerings, especially when it comes to voluntary benefits. Voluntary benefits are paid for by the employee, typically at a significant cost savings due to group rates. Aging parents? Think about long-term care insurance. Sole breadwinner? Consider disability insurance. Buying a home? Access a legal services plan. New apartment? Don’t forget renters insurance.

• Explore the advantage of pre-tax accounts: If your employer offers a flexible spending account for health care, vision and dental out-of-pocket expenses, consider that pre-tax savings can reduce your taxable income.

 If you have a young adult in the household with their first job, encourage them to bring the package home and help them through the process.  With health care costs continuing to rise, making the right health insurance choice can save you money.

Sometimes the best thing you can do for yourself or an aging parent is to get professional financial advice.  People who handle investing as a full time job can help you understand the options and the trade-offs and work through some of the emotions (or keep you from doing something stupid).

 So as you seek the right person to help you, there’s one question you should ask up front –“How are you compensated for handling my money, making this investment for me, or when I buy this financial product or insurance policy?”

 Here are two two terms you want to understand as you seek financial planning assistance:

 Fiduciary responsibility – which means the advisors must act in your best interest

 Suitability – which means the advisor/agent/broker has deemed the product suitable for you but the product selected does not have to meet the “in your best interest” test.

 Here’s an interview from NPR Marketplace that does a nice job of explaining the difference.  This is one of many consumer regulations that Congress will be tackling when they return next week.  Should brokers be required to meet the “in your best interest” test when they sell you a product?

 It is particularly important to help older adults.  Research shows that as we age we tend to become more trusting, more optimistic and less willing to question.

While the Congress wrangles through it’s debate on the issue, you can be a smart consumer by always asking someone selling you a financial product how they are getting paid and what their commission is. Generally, an advisor with fiduciary responsibility will charge you on a fee basis, hourly or a fee of assets under management.  A broker or insurance agent is compensated by commission (a % of the sale). 

 If they give you a choice, but push one over the other, ask if their commission differs.  It might be the right product for you or it might be a product with a higher commission for them.  If they won’t tell you or dodge the question – then you probably have your answer.  Look elsewhere for an advisor who puts your interests first.