How to Choose a Benefits Plan

Your employer benefits plans have a direct link to your family’s health and wellbeing.

Table of contents

Benefits. I know, I know…they’re a headache, but yet oh so important!

Benefits refer to a broad range of coverages and “perks” employers offer employees.

Often, people make their benefits selections based on what appears to cost the least, but appearances can be deceiving! What looks like the least expensive option may actually cost you more when you consider all of the factors.

How do you choose benefits? And how do you know what a good benefits package is?

In this post, I’m giving you a step-by-step guide for sifting through the cluster that is benefits and what to look for to make sure you get the most out of them. I  will focus on medical, dental, vision, short-term and long-term disability, and retirement.  

So, where do you even begin when making your selections? Let’s goooo!

Look at each benefit plan carefully and give yourself time to look through the details.

Let's talk medical, dental, & vision!

1. Think of your family’s current healthcare expenses and any treatment you’re anticipating in the upcoming year.

   Does someone need surgery? Do you have prescriptions? Is it getting harder to see when you’re driving? Does your kid need braces? Just take a few minutes to really think about your family’s healthcare needs. Write them down and as you go through each plan, make sure that your current treatments/medications, as well as your upcoming treatments, are covered. Also, make note of how much each plan (medical, dental, and vision) will cover after the deductible is met (100%, 80%, etc.).

2. now, look at what the deductible is for each plan.

   The deductible does not apply to preventative care (annual wellness exams, teeth cleanings, and annual vision exams), but it does apply to other care/treatment.

   Two things to make note of regarding a deductible: 1. the amount; 2. whether it’s embedded or non-embedded. In general, the amount of your deductible is what you will have to pay for the plan to kick in and cover expenses outside of preventative care. The type of deductible – embedded or non-embedded- determines how much of that deductible has to be paid before the plan kicks in when you have more than one person on your plan.

   So, if you are the only person who is on your plan, whether the deductible is embedded or nonembedded doesn’t impact you. If your deductible is $2,000, you know that you for sure are going to have to pay that $2,000 before the plan will pay for anything beyond preventative care. But, if you are covering your child(ren) and/or partner on your plan, knowing if the deductible is embedded or non-embedded is important.

   An embedded deductible means each family member has their own deductible within the overall family deductible. For example, let’s say you are a family of four on the same plan and your son needs medical care. If the family deductible is $4,000 with each individual having their own $1,000 deductible, then as soon as your son’s medical care costs hit $1,000, the plan will kick in and start to cover the rest of his qualifying care expenses at the pre-determined percentage (100%, 80%, etc.) outlined in the benefits plan summary.  

   When a deductible is non-embedded, everyone’s medical costs contribute to lowering the family deductible. Which, on the surface, sounds great, right? But let’s go back to our example. We have the same family of four and the same $4,000 family deductible. But instead of the plan kicking in and paying for your son’s medical costs once he’s accrued $1,000 in costs, it doesn’t kick in because he doesn’t have his own deductible within the family deductible – there’s just the family deductible. So, his treatment will still be coming out of your pocket until you’ve paid that $4,000 family deductible in full.

3. Next, look at the total out-of-pocket maximum a plan allows, which is different than the deductible.

   The total out-of-pocket maximum is the most money the insurance company can say you owe for your medical expenses within the benefit plan year. This amount includes the deductible, copays, and coinsurance for COVERED services and providers that are in-network. I’m going to repeat that – COVERED services that are in-network (https://www.healthcare.gov/glossary/out-of-pocket-maximum-limit/). This is so important because the difference between covered and uncovered services and in-network versus out-of-network could cost you thousands.

   If you have medical treatment coming up, you need to make sure that it’s covered by the insurance plan. And whether or not you have foreseeable medical expenses coming up soon, you need to make sure that your regular providers – your family physician, dentist,  eye doctor, allergist, etc. – are in-network with the plan you’re considering. If not and you choose that plan, you’ll either have to find new doctors who are in-network (and really, who wants to do that), or you’ll have to pay the out-of-network price, which is much higher than the in-network cost.

   My husband and I, unfortunately, have experience with shelling out a lot of money for uncovered medical expenses that didn’t go toward our deductible or out-of-pocket maximum. We knew that we wanted to try for a second child, so when we were going through the benefit open enrollment process for my husband’s job, we made sure that the plan we chose would cover everything we knew would be a part of the prenatal care process…for a singleton. Fast forward months later, and we found out we were having twins!

   What no one tells you about being pregnant with multiples is that on top of having to see your ob regularly as you do for any pregnancy, your multiples-pregnancy is automatically considered “high risk”, which means that you also have to go to several appointments at a maternal-fetal clinic. And those appointments, along with whatever they do at those appointments, aren’t generally covered by insurance. So, our pregnancy with our twins cost us thousands of dollars more than we paid for our pregnancy with our daughter. This isn’t necessarily something that we would have been able to prevent, but had we known that we could have planned better financially.

    Back to your benefits package selection process. If the base plan has a low monthly premium (what will be deducted from your paycheck) but a high out-of-pocket maximum, and you know that you are going to have a lot of medical expenses, it may be worth considering a buy-up plan. A buy-up plan has a larger monthly premium (more money taken out of your paycheck) but usually has a lower out-of-pocket maximum, so it may actually cost you less money overall.  You will have to crunch the numbers to make that determination, but just keep that in mind.

Now let's talk HSA's & HRA's!

4. Then, check if your employer is offering either an HSA (Health Savings Account) or an HRA (Health Reimbursement Arrangement) with one of the medical plans.

HSAs are wonderful! They are tax-free savings accounts for medical and dental costs. Any money direct-deposited from your paycheck into your HSA is done so tax-free, which lowers your taxable income (score)! And many times, although not always, if an employer has an HSA attached to a plan, the employer will contribute to that account to help you pay the deductible (yay for free money), so also check the plan description for an employer HSA contribution. 

A word of caution though…you will get a debit card for your HSA. You can use it for medical/dental bills, prescriptions, and even over-the-counter medications and medical supplies, but it’s important to keep receipts of what you purchased and make sure you’re only using the HSA to pay for qualified medical expenses. If it’s found that you used it for non-qualifying items, you will owe income tax on that money!

An HRA is an account that employers contribute money to (yay for more free money) and then you submit qualified expenses for reimbursement. HRAs are nice, but there are three things to keep in mind with HRAs that you don’t have to deal with for HSAs. With HRAs, if your employer does not provide you with an HRA debit card, then you have to pay out-of-pocket first and then wait to be reimbursed. So, while it’s nice to be reimbursed, it may take a while actually to receive that money.

The second thing is the HRA is tied to that specific employer whereas an HSA is owned by the individual (you), so it’s portable – you can use the HSA money even after leaving that job. The third thing is that HRAs are “use it or lose it”, but HSA funds roll over year to year – if you still have money in your HSA account at the end of the benefit year, you can still use it! So, if you don’t use the full amount that your employer contributed to the HRA before the next benefit plan year, that’s money you won’t be able to get back. If the benefit plan expires at the end of the calendar year, make sure you get all of your appointments and treatments in by December 31st so that you can still submit it for reimbursement, because anything scheduled or done on or after January 1st will fall under the new benefit plan and the new year’s HRA.

Now onto something important but often overlooked!

5. Now, look into what your employer offers for short-term disability and long-term disability.

Both are super important but are often overlooked. Moms, you need both of these! Why? Because they provide you with income replacement of 50-70% should you be physically unable to work due to illness or injury! How are you going to support your children if you are unable to work? With short-term and long-term disability! So, why do you need both? Because they cover different timeframes.

The amount of time covered by short-term disability depends on your employer’s plan but is typically 6 months or less.  Long-term disability plans pick up where short-term disability plans end. Long-term disability plan timeframes vary from plan to plan, but generally, they can last up to retirement age (age 65) or when you become eligible for Social Security.

I would cringe every time I processed employees’ benefits enrollments and saw that people didn’t elect short-term and long-term disability. In fact, an unfortunate situation with one employee comes to mind. This employee, who happened to be a mom, didn’t elect either short-term or long-term disability, and later that year, she was diagnosed with cancer. She had to take a significant amount of time off from work for her treatments, and that’s when she realized the mistake she made - when she was weak and exhausted, and there was nothing she could do at that moment to make the situation better. That’s an awful place to be. If you fall ill or become disabled, your focus should be on healing and recovery. How will that happen when you are so stressed out about how you’re going to put food on the table or pay the rent?

Last but not least!

6. Finally, look into your employer’s retirement plan.

You might think that you can’t possibly afford to contribute anything right now since kids are way expensive – but even if it’s a small amount per pay, the compound interest that it will earn over time will help it grow to more than you would think.

Also, see if there is an employer match program. If there is and you don’t participate in the plan, that’s free money you’re leaving on the table, which will cost you big in the long run! You are a hard-working mama who deserves to retire comfortably! Your future empty-nest-self will thank you!

Different employers offer different retirement savings options. For-profit, private companies provide a 401(k) or Roth 401(k), but if you work for a non-profit, school, university, or church, it would be a 403(b) or Roth 403(b) plan (www.forbes.com/advisor/retirement/403b-vs-401k/).  If you work for the government, that has its own retirement/pension plan.

Is there a difference between a 401(k) and a Roth 401(k)? You bet! A regular 401(k) is pre-tax, which means any contribution you and your employer make is the full dollar amount rather than the after-tax amount. If you contribute $30 per pay, the full $30 goes into your retirement savings. The great part about this is that it lowers your taxable income, which might help you out during tax season! But when you retire and you withdraw that money, you will then have to pay taxes on it at that time. And with inflation, that might mean you pay a higher dollar amount than you would today.  

A Roth 401(k) is post-tax dollars. Basically, what you’re doing with a Roth investment account is paying the taxes now so that when you’re older and living off of that money, you don’t have to. The same concept applies to 403(b) versus Roth 403(b).  Both options have pros and cons, so you’ll have to decide what makes you most comfortable – lowering your taxable income now, or not having to worry about paying the taxes on your withdrawals when you’re older.

If you do decide to participate in your employer’s retirement plan (and most likely, you really should), just remember to actually select your investments! Checking the 401k plan box during enrollment and deciding how much per pay you want to be deposited into the account does not mean you’re all done. After open enrollment, your employer will most likely schedule a time for a financial adviser to come on-site to talk with you about the next steps. They usually have pre-selected investment options that you can select and be done with it, but you will also have the option to select your own investments. Whichever one you decide is completely up to you – but just make sure you do one of them! If you don’t, your 401(k) is just a savings account that you’re adding money to, rather than an investment account that’s accruing compound interest.

I am so passionate about this because all too often women don’t save for retirement. Two common reasons are they think they have more time than they actually have and they sometimes defer to their spouses to oversee that.


As I mentioned earlier, compound interest is what makes your money grow, and compound interest requires time, so the earlier you can invest, the better. And if your spouse takes the lead on handling your retirement…it’s still your retirement, so you need to know where things stand.

Also, it’s entirely possible for your spouse to have their 401k through their employer, you to have your 401k through your employer, and you both to have IRAs. It really isn’t necessary or in your best interest to not be active in your retirement savings plans and to not take advantage of all investment opportunities, even if you’re not the one who handles the family finances.

There are some great resources out there geared toward women to learn more about investing and to help women start investing. HerFirst100k (https://herfirst100k.com/) and Ellevest (https://www.ellevest.com/) are two of them, and they really make it easy and user-friendly, plus they have a ton of resources! Check them out!

Once you’ve gone through each of these steps, you’ll have a much clearer understanding of what elections you need to make, and how much it will cost. As life goes by and your circumstances change, what worked for you one year may not necessarily be the best choice for you the next year.

You need to go through this process each year to guarantee that you’re selecting the best coverage for you at that time.