Monday, April 2, 2012

Understanding Employment Benefits

Since I seem to be on a job advice kick this week, I thought I would address an important topic that so many people seem to overlook. The funny thing is that not only employees miss this, but more surprisingly employers do too. Today’s topic - benefits. 

With unemployment rates still pretty high, many people may think beggars can’t be choosers, right? Well, if you are unemployed and really need a job, that may be right but, you also don’t want unemployed beggars to turn in to employed beggars.  Allow me to explain…

Let’s pretend you get a job offer paying $60,000 per year. The job comes with benefits that include health insurance, dental, vision, and paid time off. That sounds pretty good, right? Well, maybe…maybe not. If we zoom in on the health insurance for a minute, the picture may change.  First, you need to know that most employers require an employee contribution toward medical insurance. That means that money will be deducted from your salary to pay your health insurance costs. That deduction can be huge!

In 2011, the Kaiser Family Foundation reported that the average family health insurance premium was over $15,000 per year. Someone has to pay that in order for you to have health insurance. As I said before, most employers share that cost with you and accordingly deduct the money from your salary to pay the insurance company. The question is, how much do you, the employee, have to contribute to that cost?

What I find completely shocking is that when job offers are made, prospective employees rarely (if ever) ask how about the employee contribution to health insurance. Ever worse, employers very often don’t offer that information. As a matter of fact, on three different occasions I have had to ask potential employers for that information and wait for a reply. The employers were completely unprepared for the question – because no one ever asks. Considering the potential for losing $15,000 out of your annual salary – I would think people would be asking this first!

Now, it is also important to know that insurance premiums must be paid every month whether you are sick or healthy and whether you go to the doctor or not. So, don’t think this doesn’t apply to you because you aren’t sick – it applies to everyone who has health insurance. That does not mean you should not have health insurance. That would just be foolish. Healthcare costs are expensive. Even if you are relatively healthy, just going to the doctor for a sinus infection can be very expensive and heaven forbid you have to go to the hospital for an emergency. You must have insurance because you never know.

Now let’s assume that the employee contribution is acceptable – perhaps $7,500 per year or 50%. Does that mean that you are making out? Not necessarily! You need to know about the plan that they are offering. You need to investigate what is and what is not covered. Inexpensive health insurance plans abound… but most of them are awful! 

With inexpensive plans you will find (often by surprise) that many things are not covered and that copayments and deductible are extremely high. If you end up needing medical care and you have a $7,500 deductible, guess what… you are paying the full $15,000 (your $7,500 contribution to the insurance premium and $7,500 deductible) and it is pretty easy to rack up $7,500 in medical bills with just one visit to the hospital.

In conclusion, health insurance is important because healthcare is expensive but you have to consider the out of pocket expenses. The out of pocket expenses include the employee contribution toward the monthly insurance premium and the coverage level including non-covered services and deductibles. Be sure to ask a potential employer about this because it can have a huge impact on your take home salary. 


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