Congrats -- landing a new gig during a recession is no easy task. But before you get too comfy, there’s one more thing you need to check off your to-do list: read your work welcome packet. Sure, that stack of papers may be even more boring than taking in the “M” section of the phone book, but navigating the company health plans, setting up a pension program, reviewing stock options and taking advantage of insurance are key to setting you up for the sweet life down the road. Here’s how to amp up the value of your paycheck by making the most of the benefits your new company might offer.
Look Over Offered Health Insurance Plans
Before you even crack open your health packet, Carolyn McClanahan, MD, CFP and founder of Life Planning Partners Inc. wants to get one thing established. “Young couples need to pick a plan that fits their budget now, not one that will give them the biggest break at tax time,” she says. Here’s how to choose between the three major types of group health plans offered by most insurance companies.
Preferred Provider Organization (PPO)
What It Is With this traditional health plan, you share part of the cost of the insurance premium with your company, and you also pick up the tab on a copay (usually around $35) when you see a doctor, therapist or dentist. The same goes for all prescriptions.
Who Should Choose It If your company pays the lion’s share of the premium, there’s no reason not to go with this plan. For one, you get a wide choice of doctors—and you’ll get partial coverage if you go with an MD not covered by your plan (you’ll only pay about 30-50 percent of the bill). And here’s another perk: You don’t need referrals to see specialists, so you’re free to make appointments on your own for whatever care you need.
Tip Set up a Flexible Spending Account (FSA) with your insurance company so you can use pretax dollars for copays. “It’s a use-it-or-lose-it arrangement,” says McClanahan. “So if you decide to use it, make sure you have a back-up plan about how to spend the money by the end of the year, like getting new glasses or having dental work done.”
Consumer Directed Health Plan (CDHP)
What It Is This plan is known for having deep discounts on premiums (usually about 10-20 percent less than traditional PPO plans), which means you’ll get less taken out of your paycheck. The catch? It also has a steep deductible (at least $1,200 per person and about $2,400 for families), so you’ll have to meet that before you start reaping any real benefits.
Who Should Choose It Preventive care such as your annual physicals, gyno visits (including mammograms) and also immunizations are usually covered at no cost (meaning, the deductible doesn’t apply to these). Translation: This plan can be a great deal if you don’t think you’ll need much medical attention.
Tip Open a health savings account (HSA)—a tax-free bank account used for paying everything from medical, dental and vision appointments to plain old pharmacy expenses (you can deposit up to $6,150 for a family in 2010). And don’t worry—you won’t have to go on a shopping spree at CVS come December; any money left in the account rolls over to the next year. So what does this mean exactly? If your company will help fund your CDHP by contributing to your HSA, this plan can be a great deal.
Health Maintenance Organization (HMO)
What It Is With low premiums and small deductibles, this plan seems like the best of both options—but you won’t have a ton of control (type-As need not apply). How it works: You’ll dish out a copay for doctor visits (usually $10 to $25) and also hospital stays (which tend to be higher), but preventive care (like annual exams and gyno visits) is often free.
Who Should Choose It An HMO plan only really works if you’re comfortable seeing an assigned primary physician (probably an employee of the insurance company) and letting that doctor refer you to specialists when needed. It’s also more likely to limit the types of tests your insurance will pay for.
Tip You can still take advantage of an FSA with an HMO. “If you consistently spend at least $600 a year on copays and prescriptions, put $50 a month in the account,” says McClanahan. It’s pretaxed money, so you’ll save in the end.