Michelle Singletary

• Color of Money Live Archive • Column: The Color of Money • Personal Finance Section • Business Section • Talk: Business message boards • Live Online Transcripts • Subscribe to washingtonpost.com e-mail newsletters • mywashingtonpost. com -- customized news, traffic, weather and more

It's November, do you know where your open enrollment packet is? Are you confused about what choices to make about your benefits? Or are you just planning to keep things the way they were?

Whatever you choose to do, be sure to review all your open enrollment packet this year. There could be major changes in your co-payments, deductibles and other benefit options. Because of rising health-care costs and the downturn in the economy, chances are your employer will be shifting more expenses to you or cutting back on benefits - - or both.

Join Michelle Singletary and Hewitt consultant, Michael Murphy, to discuss your options.

Murphy leads the health and welfare consulting practice in Hewitt's Virginia office. During his eight-year tenure at Hewitt, Michael has worked in the New England and Mid-Atlantic markets with a variety of clients, helping them achieve increased value and efficiency in benefits design and delivery.

Murphy brings fifteen years of health care benefits experience to his clients. His projects have included strategic benefit design, plan funding and financial analysis, carrier negotiations and bidding, and program implementation. He has extensive merger and acquisition experience, working through the issues surrounding the integration of benefit programs.

The transcript follows.

Editor's Note: Washingtonpost.com moderators retain editorial control over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.

Michelle Singletary: Good afternoon and welcome to another discussion about your money. Today I hope to address your issues or concern about open enrollment. So send in your questions.

Michelle Singletary: What's the first thing folks should do when they get their open enrollment packet?

Michael Murphy: OPEN IT! I made the mistake of not opening my packet years ago and my previous employer defaulted me to no coverage. It is critical to understand what happens if you don't respond and what has changed so that you can begin considering changes that may be right for you.

Michelle Singletary: This year a lot of government workers have the option of buying Long Term Care Insurance. How can someone go about deciding if this insurance is right for them?

Michael Murphy: It is important to consider your needs first. Will you need the coverage for yourself or a family member? What is the likelihood you will need the insurance in the near term, or is it a longer term need? How much will it cost you to purchase the insurance and can it be more effective for you to begin saving on your own. With this new offering, there will be a great deal of resources offered to workers to help them make these decisions. Take advantage of them before signing up.

Michelle Singletary: If someone does participate in a flexible spending account what should they be careful to do and not do?

Michael Murphy: Make sure they will be incurring expenses that will be eligible for reimbursement under the plan.

For Dependent Care spending accounts, only those expenses incurred so that both parents can work are eligible for reimbursements. At the risk of receiving hate mail, "soccer moms" can't be reimbursed for babysitting services.

In health care spending accounts, make sure you calculate the amount you will need carefully. Any amount you place in the account that you do not use during the year is forfieted.

Michelle Singletary: Why does it make sense to participate in a flexible spending account? Isn't is like asking people to set aside money for an expenditure that they have to currently pay? Does this really just benefit higher income workers?

Michael Murphy: Generally, Flexible spending accounts benefit all workers because they allow you to pay for out-of-pocket expenses with pretax dollars. So you effectively have the government pay for some of the cost.

But you do need to planful to make sure you don't leave money in the account at year end, because anything you set aside is forwarded and cannot be carried forward for you to use the next year.

Michelle Singletary: Why is it important to review your health care options if you don't plan to change or you haven't had a change in your family status?

Michael Murphy: To see if things have changed in a way that another option may be better for you. For example, your employer may have changed the design of the plan and another plan may better suit your needs. Or the health plan may have discontinued its relationship with your favorite physician or hospital. Its important to take a quick look just to make sure, and there usually is a customer service number you can call at the health plan just to make sure everything is the same.

Michelle Singletary: If your spouse has a good health plan does it make sense to sign up and pay to be covered by both plans? Will one health plan kick in if you exhaust the benefits of another?

Michael Murphy: In the "old days", many couples signed up for both plans. They often paid little out of their paycheck, and received the benefit of essentially 100% coverage as the two plans coordinated payment for the services you receive.

With the increase in health care cost today, employers are often doing everything they can to deter this. They have begun requiring employees to prove that they are not covered under another plan to enroll, and they often will reimburse expenses (as the supplemental insurer) only to the amount they would have paid under the plan (not 100% of expenses).

So make sure you understand what it will cost you to enroll in both plans, and what benefit you receive if you do so just to make sure it is worth the money.

Michelle Singletary: Can you explain how a flexible spending account works?

Michael Murphy: A flexible spending account works by allowing you to deduct a portion of your pay each payroll period before taxes are deducted from your pay (ie pretax). Then you can submit eligible expenses for reimbursement that you pay out-of-pocket throughout the year. With these plans, your money goes farther because your essentially paying for these expenses with pre-tax dollars.

Michelle Singletary: If I'm young why do I need disability insurance?

Michael Murphy: I was young once too. Even if you are, you are still at risk of being unable to work for months or even years if you have a car accident, get hurt playing flag football, or slip on the dance floor or your local night club. Although you may not have accumulated a great deal of personal articles (and related debt), you still will incur living expenses for rent, food, and the like. Disability insurance helps you cover those expenses until you can get back to work.

Michelle Singletary: When does it make sense to boost the life insurance provided by your employer?

Michael Murphy: The purpose of life insurance is to allow your family to meet the financial commitments of your lifestyle even after you're gone. These commitments change when you get married, have children (that need to be raised), buy a home (with a mortgage), or your lifestyle otherwise changes.

When deciding how much to buy, think about the longer term cost of those commitments, how much your dependents will receive, how likely they are to live off the interest/gains over time, and how much principle they will have to use.

Michelle Singletary: What's the basic difference between a PPO and a HMO?

Michael Murphy: A PPO has two levels of benefit. An in-network (and usually better) level of benefits if you go to network doctor or hospital, and an out-of-network (and usually lower coverage level) benefit where you can go to any doctor as long as you are going for a medically necessary reason. Also, PPOs do not require you to go to a primary care physician (family doctor, internest, pediatrician) to get approval to see a specialist. However, you often do need to call the health plan to get approval to go to the hospital.

HMOs only have one level of benefits (in-network). You must see one of their network physicians for the benefit to be covered. Interestingly, HMOs have been relaxing some of their rules and allowing their members to see certain specailists without going through their family doctor, so inquire whether your plan allows you to do so.

Michelle Singletary: Is the lowest cost health plan, based on premium, always the best option?

Michael Murphy: Not necessarily. There are two types of costs - the amount of your contribution deducted from your paycheck every week, and the amount you have to pay when you use the plan (copays, deductibles, coinsurance, etc.). You should consider both costs when comparing plans. If you have a need for a great deal of services, you may be better off paying more out of your paycheck if the your cost to get services is less. Conversely, if you hardly ever need services, you may choose a plan that requires you to pay more when receiving services, but cost little to you in your paycheck.

Michelle Singletary: A number of employees are beginning to consider getting just catastrophic coverage. What is that and who would it be right for?

Michael Murphy: Not only are a number of employees considering high deductible plans, but many employers are finding themselves unable to offer anything but due to the increase in health care costs.

If you have a choice, think about how likely you will need to get care during the year. Then figure out how much it will cost you if you do. Understand the maximum you will have to pay if you expect (or are concerned about) needing lots of care. Then decide whether you can afford it. It is likely the cost out of your paycheck will be less and still may be worth it. Also consider whether to open a health care spending account (if your employer offers one) so that you can pay your out-of-pocket cost with pretax money.

Michelle Singletary: You bring up an excellent point about actually opening your open enrollment packet. What happens if your employer defaults you to an option you discover you don't like. Can you have it changed?

Michael Murphy: Before the effective date of the change, you may be able to make a change. You'll often need to "beg" your employer to do so since it is often an administrative hassle for them. After the effective date, you may not be able to make a change unless you have a "qualifying event" according to the IRS. These include such things as getting married or divorced, having a child, etc.

McLean, Va.: I started particpating in my healthcare flexible spending account last year. It was a life saver for my prescriptions, glasses and dental work for myself and the kids...could you reiterate the tax advantages of participating...think it could help some folk out as tax time is right around the corner!

Michael Murphy: Sure, I'd be glad to. If you participate in one of these plans, your contribution is deducted from your gross pay (before taxes) so that you don't have to pay tax on it. Then you get to submit your out-of-pocket expenses and get reimbursement from this fund, with money you contributed tax free. That makes your money go farther.

For example, if you have a 15% marginal tax rate, you save 22.65% in taxes - your 15% federal income tax, plus 7.65% social security/medicare (FICA) tax.

Difference between Kaiser and Aetna? : I currently Aetna PPO but I'm thinking of switching to the cheaper Kaiser Permanente. I don't have any real attachments to any doctors. But I do need to get a lot of prescriptions filled. Which one do you recommend? I also live in Washington D.C. if that makes a difference.

THANKS!

Michael Murphy: I'm not sure I want to be on the hook for telling you which one to pick, for fear you'll hunt me down if you don't like it later. But I can give you some things to consider.

Kaiser is a staff/group model HMO which means you generally need to go to their health centers to receive care. These centers often have not only primary care services, but several specialist, labs, radiology and pharmacies under the same roof. For many, this is a very convenient way of getting care. Others prefer more ability to "choose" who they go to in the community, and plans like Aetna who contract with community physicians will have more choice.

Another thing that is unique about Kaiser is that they are much more restrictive in what drug they will prescribe for you. It helps them keep their cost to you lower which many people like, but you may want to be sure you understand how the program works before signing up.

Michelle Singletary: Just out of curiosity, does the company get to keep the forfieted money left in a flexible spending account or does it go to the government?

Michael Murphy: Employers get to keep the money. However, because employees can use the full value of their account on January 1, some employees use the money, then leave the company before they actually contributions necessary to cover the cost. So most employers use this leftover money to cover those shortfalls, and to cover the cost the vendor charges them to administer the plan.

Michelle Singletary: How long do employees usually have to get back money put in a flexible spending account?

Michael Murphy: Employers usually allow employees to submit prior year expenses up to three months after the end of the plan year. They often also provide notice to employees if their balance is at risk of being forfeited.

Michelle Singletary: I found out after my daughter became very ill that my HMO was affilated with one of the best children's hospitals in the country (Children's National Medical Center) but honestly I had never thought to check which hospital or hospitals my plan would refer our family to if any of us needed to be hospitalized. I was just so focused on the primary care physician and medical center. How often do people forget to check such things when choosing their plan during open enrollment?

Michael Murphy: HMOs work in different ways, but it is generally wise to not only look at the physicians you will use, but what hospitals they have admitting privileges to to make sure you are comfortable with where you or your children will be admitted in case they have a problem. Ask your doctor or your health plan if you are unsure.

Michelle Singletary: Does it make sense with the rising cost of insurance through your employer to seek insurance on your own?

Michael Murphy: Generally not. Most employers still get a "group rate" which is often better than what you can get on your own, and they subsidize the cost so you aren't actually paying the full premium on your own.

However, some employers pay so little that there are situations where employees may do better on their own. If you do think you're paying too much, you may be able to call around to health plans in your area to see what options they have for you separate from your employer. You will likely have to prove that you are healthy though, so make sure the coverage will be there if you need it.

Michelle Singletary: So, to follow-up on the question about two plans and two working people. . . If you and your spouse sign up for a health plan you make not get full coverage from both even tho you paid premiums for both? I'm not sure I understand.

Michael Murphy: For example, assume you and your spouse have double coverage under both employers. You go to the emergency room for a broken arm. Your plan reimburses the cost except for a $200 deductible and 10% of the balance. If your spouses plan has the same level of coverage (for simplicity) it may cover none of the additional cost to you if their plan only covers the amount they would have otherwise paid.

Look for the term carve-out versus benefits coordination of benefits in your plan document. Carve-out is more restrictive reimbursement approach.

Michelle Singletary: What are some of the things people forget most to do during open enrollment?

Michael Murphy: Following the rules, and enrolling in time. You also want to make sure you are looking at each of the plans your are elegible for. Many employees recieve information only on those coverages they have today. Make sure you are taking advantage of all those benefits available to you, assuming you will benefit from them.

Michelle Singletary: Well that's it for today. I think this is such an important issue and I'm glad Mr. Murphy was able to answer so many of the questions about the choices that have to be made during open enrollment. Please don't forget to join me Nov. 20 at 1 p.m. for a discussion of the Color of Money second book club choice Arthur Levitt's of “Take On the Street: What Wall Street and Corporate America Don’t Want You to Know." Considering recent events and the resignation of the current SEC chief Harvey Pitt you should make plans to catch this chat. Again, thanks for joining me today.

Michelle Singletary:

That wraps up today's show. Thanks to everyone who joined the discussion.

Stay tuned to Live Online:

Election 2002: Maryland Results at 3 p.m. ET
Election 2002: MSNBC's Bill Press at 4:30 p.m. ET

Did you know that you can follow more than one Live Online discussion at the same time? Just open another browser window and toggle back and forth between discussions! And, if you miss one, catch up with the Live Online transcripts.

Keep up with the latest in news, sports, politics and entertainment with washingtonpost.com e-mail newsletters.

Personalize your Post with mywashingtonpost.com. Get customized news, traffic, weather and more.

   |      |