How to Make Wise Choices About 2011 Benefits

Nov. 9, 2010— -- It is health care benefits enrollment time for many workers and experts say it's more important than ever to look carefully at your policy.

Mellody Hobson, "Good Morning America" financial contributor and president of Ariel Investments, shared some tips to keep health care costs down.

Here are Hobson's the top things to keep in mind when choosing your 2011 benefits:

1. Review Your Policy

According to Hobson, it's important to keep track of changes to your policy.

"You have to understand the changes that are occurring in your health plan," she said.

One study found that 1 in every 9 employers expects to raise their co-pay amount by more than 15 percent.

While choosing the plan with the lowest premium is acceptable if you're in good shape and not anticipating any major surgeries, Hobson said your out-of-pocket costs may be much higher and might negate the savings you had in premiums.

2. Look at Premium Options

It's important to consider the level of health coverage.

Many plans now cover only 80 percent of those costs. Plans that cover more may cost you more in premium, so Hobson suggests that make sure you compare your premium versus what your average out-of-pocket costs will be with each plan.

3. Prescription Drugs Costs

The cost of prescription drugs is also another factor to consider when choosing a plan. Many plans are requiring prescription co-pays instead of a flat fee co-pay.

For example, for one drug you may pay 30 percent of the cost while another drug may cost you 50 percent.

Hobson said when you are comparing plans, consider what drugs you use and see if your total prescription co-pay amount exceeds any premium savings you get with the plan.

4. Find Out How Your Plan Covers Kids

One of the provisions in the new health care law is you can now keep your children on your insurance plan up to the age of 26.

Previously, children could be taken off a parent's policy as early as 19 if they were not a full-time student.

Due to the high rates of unemployment among young adults, it's important to find out if your plan will cover your child.

Hobson said it does not matter if they are married, in school, financially dependent on you, or even if they are not currently on your plan.

Insurance companies have responded to this new provision by introducing different pricing systems.

One option to consider is having your child purchase their own private insurance. Plans are as low as $100 per month.

Hobson said it's important remember that if you are adding a child, you need to do it in this open enrollment period, or they will not be eligible next year.

But coverage for children under the age of 19 with pre-existing conditions cannot be excluded from coverage on the health plan starting in 2011.

Flexible Spending Accounts

Besides the traditional HMO and PPO plans, flexible spending accounts (FSAs) are still a good option, Hobson said.

You can still use the accounts for deductibles and co-pays for medical office visits, dental needs, and child care.

However, one thing that is changing in 2011 is that you can no longer use your flexible spending account to pay for drugs that do not require a prescription, known as over-the-counter drugs.

This is important to remember when you decide how much money to set aside.

"If this change is going to affect you a lot then I would suggest lowering your contribution so you don't lose it at the end of the year. Remember, with FSA's, you lose any money left in your account at the end of the year," Hobson said.

Also, how much you can contribute depends upon your plan. Currently, there's a maximum of $5,000. That amount will to decrease to a maximum of $2,500 in 2013.

If you are considering an eligible procedure that will cost more than $2,500, it might be a good idea to schedule it in the next two years before the maximum goes down.

Health Savings Accounts

More employers are promoting high deductible insurance plans that are included with health savings accounts (HSAs).

In 2011, about 61 percent of employers expect to offer this type of plan (also known as consumer-driven health plans).

Hobson said these plans are a good choice because they have much lower premiums.

"You can save about 40 percent over traditional plans. In order to participate in an HSA, you have to be enrolled in a high deductible plan (approximately $1,200 or higher)," she said.

Health savings accounts let you set aside $3,050 as an individual or $6,150 as a couple in pre-tax savings account.

The money in your HSA earns interest or invested in funds like an individual retirement account (IRA).

You can withdraw your money tax-free if you use them for medical expenses like deductibles.

One advantage is that if you don't use the balance, then you don't lose it and it rolls forward to the next year.

However, a higher deductible means you pay higher out-of-pocket costs up front.

An HSA cannot be used for child care expenses, only medical expenses. The accounts will no longer cover OTC drugs in 2011.

Hobson recommends talking to your human resources department to see if it is beneficial to have a flexible spending account and a health savings account.

Web Extra Tips From Mellody Hobson

Make sure you get regular check-ups. The health care reform act now eliminates co-pays for preventative care services when you use an in-network doctor. This could help you catch health problems early that otherwise may cost you much more later.

Many companies also use open enrollment time to offer additional disability coverage, long-term care coverage, and additional life insurance. If you are considering purchasing these policies, your employer may offer you the best rates possible, so it is definitely worth discussing with your Human Resources department.

Once you are enrolled in a health care plan consider using generic versions of popular drugs when possible. This could save you hundreds of dollars a year. Your health care plan administrator, pharmacist, or primary care physician can discuss your options with you.