Employee benefits explained
Al Waller: Welcome to Clearpath – Your Roadmap to Health and WealthSM. I’m your host, Al Waller.
Many employers have been making changes to the benefits that they offer their employees in response to the pandemic, and at the same time many Americans are starting new jobs. So, as an employee or jobseeker, it’s probably in your best interest to know what benefits an employer offers and how to enroll.
In my professional experience as an HR manager and consultant, I’ve witnessed first-hand how employers have gone about promoting their health insurance, retirement plans, and other benefits as a way to recruit and retain employees.
So, on an annual basis, which typically occurs in the fall, many employers have what is called “open enrollment”, when employees can select or make changes to their health insurance, life insurance and other types of benefits offered. Today, Catherine Collinson, CEO and president of nonprofit Transamerica Institute® and Mihaela Vincze, public health expert for Transamerica Institute are joining us to share what we need to know when reviewing benefits such as health insurance, health savings accounts, disability, as well as other insurances – because amid the pandemic, it’s more important than ever to know your options by choosing wisely and of course, being conscious of deadlines.
Now Catherine, I know you’ve done a lot of research among employers over the years. So, could you lead us off with what you’ve learned from your annual surveys?
Catherine Collinson: Great question Al. It's great to be here to talk about employee benefits. We've been researching what employers offer for many years. Our most recent survey we did in late 2020 – and echoing what you said earlier, employers take their employee benefits offering very seriously, not only to help their employees but as being helpful in attracting and retaining talent.
One of the things we've seen over the years in our research, which is really important to help set expectations with our listeners, is large companies are likely to offer more benefits compared with small companies.
For example, according to our late 2020 survey, we found that 80% of employers with 100 or more employees offered health insurance compared with just 57% of small companies. And we see the same type of disconnect or rift when we look at other types of insurance as well. So, if you're listening and you work for a large company be on the lookout for all the benefits we're talking about. If you work for a
small company, it's just as important. You may be offered benefits you don't know about, but also don't be surprised if you are not offered some of the things that we mentioned on the show.
Al: Right. You mentioned health insurance, and that’s probably the most standard, prevalent type of insurance companies do offer.
On that note, I’d like to bring Mihaela into the mix to walk us through the different types of insurance plans people may get through their employer. Mihaela, could you help us out here?
Mihaela: Sure, Al. Let’s start with the most basic concept and that is that health insurance plans provide coverage for eligible health care expenses such as office visits, prescription drugs, inpatient hospital services, urgent care visits and even therapy services. That’s the easy part to understand.
From there, it can get a little more complicated. But understanding the various types of plans your employer offers – and what the costs and benefits are – is vital for your health, as well as your wallet and can even help prevent surprises.
Many employers offer more than one type of health insurance to give their employees flexibility. The one you choose will help determine your out-of-pocket costs, as well as which doctors you can see. The most common types of health plans are HMOs, PPOs, and EPOs.
Al: That’s some kind of alphabet soup. What do all these acronyms stand for, and more importantly, what do they cover?
Mihaela: An HMO is a Health Maintenance Organization. It is the most common type of insurance that companies offer. It offers coverage from doctors who work or contract with the HMO. It generally won't cover out-of-network care except in an emergency. An HMO may require you to live or work in its service area to be eligible for coverage, which is important to keep in mind now that more people work remotely and may not live where their company’s HMO operates.
Al: Got it. Now what about the others you mentioned, PPO and EPO?
Mihaela: A PPO is a Preferred Provider Organization, and it offers the most choice in providers. You can use doctors, hospitals, and providers outside of the plan’s network without a referral. This choice typically comes with higher costs than the other plans. Using in-network providers can bring your costs down somewhat.
An EPO, on the other hand, is an Exclusive Provider Organization, which is a managed care plan where services are only covered if you use doctors, specialists, or hospitals in the plan’s network (except sometimes in emergencies). There are typically more options for providers with an EPO compared with an HMO.
Al: With all these diverse types of plans, and knowing that some employers offer more than one type of plan, what should folks be considering in choosing a plan?
Mihaela: I suggest starting by thinking about your health care needs – what you spent last year and any planned procedures for the coming years. Assess how important it is to you to be able to choose your own providers. If you have a family, consider their needs too. Then compare the costs and benefits of the plans offered to you. Sometimes the plans that are the least expensive may not have the level of benefits you or your family need.
Al: Sound advice Mihaela. Now shifting gears, what can you tell us about health savings accounts, which in some cases, many employers may also provide?
Mihaela: Yes, many employers offer a Health Savings Account, or HSA. It is a tax-advantaged medical savings account available to those who are enrolled in a High-Deductible Health Plan – which are plans with higher deductibles than traditional insurance plans, meaning that you pay more health care costs yourself before the insurance company starts to pay its share.
Al: And just to be clear, someone being enrolled in a health insurance plan with a higher deductible typically enables them to enroll in an HSA, right? Can you give us your perspective and some details regarding HSAs?
Mihaela: HSAs are an excellent way to save for medical expenses and to reduce to your taxable income. The funds contributed to the account aren’t subject to federal income tax at the time of deposit, the funds grow tax-deferred, and are not taxable when they are withdrawn to pay for qualified medical expenses at any point in your life.
Such expenses include those higher deductibles, copayments, coinsurance, medications, or other out-of-pocket expenses.
A great feature of HSAs is that you can use the funds at any point in time, which makes them an excellent savings vehicle during your working years and into retirement.
Al: Well, Mihaela thank you for distilling all of that. It’s quite a bit to absorb but at the same time important to know.
What about FSAs, or Flexible Spending Accounts. Can you help listeners understand the difference between those and HSAs?
Mihaela: It’s definitely easy to be confused by these two types of accounts. Like an HSA, you can use a Flexible Spending Account (FSA) to pay for copayments, deductibles, prescriptions, and other qualified health care costs. Like HSAs, FSAs also reduce your taxes because the contributions are made on a pre-tax basis. The biggest difference is that you must use most of your funds in the year they were contributed. In short, you have to use it or lose it.
Lastly, many companies also offer the ability to contribute pre-tax money to a dependent care FSA to use for eligible child and elder care expenses that you incur so you can work.
Al: That’s going to be welcome news, especially to those individuals raising young families, as well as those providing support to their aging parents or spouses.
Catherine, I’d like to turn back to you and get your thoughts on other types of benefits that employees may be offered by their employers during open enrollment.
Catherine: Of course, Al. I want to start by thanking Mihaela for providing an extraordinary amount of detail on health insurance because there are so many options, and it is so important to pick what’s right for you and right for your family.
I’m just going to touch on, in a high-level way, a few other benefits to be mindful of during open enrollment season. Be on the lookout. And of course, be prepared to do your homework.
The first benefit is disability insurance. Disability insurance can replace a portion of your income in the event of illness or injury, meaning you are temporarily disabled and unable to work. This type of disability insurance can help cover a portion of your income until you are ready to go back to work.
Companies often provide Short-Term Disability and basic Long-Term Disability to their employees and at no cost. Review the coverages because you may also be able to purchase additional Long-Term Disability coverage. This can be especially important if you need that income, in the event of illness or injury, so that you can continue to cover your costs and care for your family until you are ready to go back to work. Al Waller: Exactly, and I’m one person who can speak to Long-Term Disability coverage. I had surgery a few years back, was out for an extended period of time and can tell you it’s important to know how much is covered and the limitations because I was out for much longer than anticipated. So, it’s good to know the information in the details provided around that benefit.
What are some other benefits that we should have on our radar?
Catherine: Life insurance is another type of benefit that is commonly offered by employers. Sometimes it’s at no cost. Sometimes it’s at an out-of-pocket cost, and they typically offer various levels of coverage. And this can be especially important – no one wants to think of the unthinkable, but it can be especially important if you have a family in the event something happens to you.
A death benefit could be a meaningful way to help them stay afloat as they navigate through such a dramatic change.
Other types of benefits are called voluntary benefits, meaning they are voluntary and typically the employee pays the entire cost. These range from things including critical illness insurance to one of my favorites which is, pet insurance. We’ve all heard of the pandemic puppies. And pet insurance is a way to cover their medical expenses in the event they get sick.
Again, as we talk about on the show all the time, is its important you do your homework, so you make informed decisions about what’s right for you.
And lastly, Al, the other benefit I’ll talk about, which is typically not a part of open enrollment but is near and dear to my heart. That is retirement benefits. You don’t need to re-enroll in your 401K if you’re already enrolled but while you are thinking about benefits and planning, it’s a good time to check your account and ensure your savings and investments are consistent with your risk tolerance and years to retirement – and to ensure you are on track to meeting your retirement savings goals. And if you are not already participating in your employer’s plan, it’s always a good time to sign up, especially if there is an employer match involved. Al Waller: I’ll second that one. Time flies and before you know it, retirement will be there, and you want that retirement savings to be there for you and your family.
Now, where can our listeners turn for more information?
Catherine: The most important place listeners can go to learn more about their employee benefits is their employers. Employers typically offer this information, especially during open enrollment seasons either online through their company or through their benefits providers – or they may offer it
through email. Some may even still rely on old-fashioned hard copy via snail mail. That’s the most important place to go.
Review those materials. Review them closely so you know what the benefits involved are and what are the costs involved to you – so you can make informed decisions about what’s right for you and your family.
In terms of other resources, if you are interested in learning more, we have a number of guides as well as employer research, worker research, and materials on workforce trends at our website at transamericainstitute.org. You can also follow us on Twitter at @TI_insights, and we have a Facebook page as well.
Al: Catherine and Mihaela, thank you both for sharing this tremendous wealth of information.
And for our listeners who don’t have access to health insurance at work, check out our recent episode of ClearPath—Your Roadmap to Health and Wealth titled Medicare Explained, or our forthcoming episode on the Health Insurance Marketplace®.
ClearPath: Your Roadmap to Health & Wealth is brought to you by Transamerica Institute, a nonprofit private foundation dedicated to identifying, researching, and educating the public about retirement security and the intersections of health and financial well-being. You can find our weekly podcast on WYPR’s Podcast Central and mobile app, wherever you get your podcasts, and at transamericainstitute.org.
I’m your host Al Waller. Until the next time, stay safe, be well and thanks for listening.
This podcast is produced by Transamerica Institute with assistance from WYPR.