Other Forms of Health Coverage

Health benefits concern the physical well being of employees and their families. Broadly speaking, this could include such things as medical coverage, dental and vision insurance, prescription drug plans, certain types of disability coverage, and counseling services, often called employee personal assistance programs (EAP). You might also have a flexible spending account, which allows you to pay for certain medical and dependent care expenses out of pretax dollars.

Dental plans
Dental plans come in almost as many forms as regular healthcare coverage. Basic dental coverage usually has categories of coverage for preventive care, routine restorative care and major restorative care. Make sure you are aware of the maximum annual benefits that the dental plan offers. There are limits to what an insurance company will pay in a calendar year. If you know you have some major restorative work to be done, you need to pay special attention to your plan's maximum annual benefit, which usually runs between $1,000 and $1,500. You also want to know if the plan offers an orthodontia benefit and if so, are there lifetime maximums for this benefit.

Vision coverage
Most employers offer either a comprehensive vision insurance plan or some type of vision coverage as a free side benefit or optional purchase benefit along with the health insurance plan. Typically, an employer will offer vision coverage as a discount program. Costs will vary by employer but should provide you with at least a 10 percent discount. Vision coverage is meant to cover only predictable costs such as comprehensive annual or bi-annual exams, lenses, frames and contact lenses.

Prescription drug plans
Prescriptions are the fastest growing component of health care costs. To address this, health insurance companies have prescription drug programs designed to keep drug coverage affordable. Health insurance companies usually offer prescription plans with various co-payments and deductible arrangements. A co-payment can be a flat amount or a percentage of the total cost of the drugs. Your plan most likely will have different levels of coverage for generic and brand name drugs. Generic drugs have the same active ingredients in the same amounts as the matching brand name drugs, but usually cost less. Many plans want patients to use generic drugs and will provide more coverage for them than for brand name drugs. If you want a brand name drug, you may have to pay a greater share of the cost.

Short-term disability
Short-term disability (STD) coverage provides you with income when a non-work related disability like injury, sickness, or pregnancy requires you to be away from work for an extended period of time. A benefit is usually paid from the beginning of an injury, or after a short period of time if a disability is due to sickness or pregnancy. STD plans can be designed to stand alone or coordinate with an employer's sick leave plan.

There are often restrictions for STD coverage eligibility. For example, some employers may require an employee to have 30 scheduled hours of work per week, or there may be a waiting period before an employee is able to qualify for the STD program. Some STD plans allow an employee to receive 100 percent of base salary (or prior year's W-2 earnings, whichever is greater) for the first 15 days, and then a percentage of base salary thereafter, up to a maximum of 180 days for each period of continuous disability.

Flexible spending accounts/Section 125 plans
A flexible spending account (FSA) is a type of cafeteria plan authorized under Section 125 of the Internal Revenue Code. An FSA is a special kind of account, funded by the employee on a pre-tax basis, that provides for tax-free reimbursement of eligible expenses. FSA's may be set up to provide reimbursement for eligible medical expenses or dependent care expenses (child or elder care).

The contributions you make to an FSA are deducted from your pay before your federal, state, or social security taxes are calculated. These deductions are never reported to the IRS. The end result is that you decrease your taxable income.

At the beginning of the plan year, which usually starts January 1st, your employer asks you how much money you want to contribute for the year (there are limits). The amount you designate for the year is taken out of your paycheck in equal installments each pay period and placed in a special account by your employer. As you incur medical expenses that are not fully covered by your insurance, you submit a reimbursement form explaining the eligible expense and proof of payment to the plan administrator, who will then issue you a reimbursement check.

Any expense that is considered a deductible medical expense by the Internal Revenue Service and is not reimbursed through your insurance can be reimbursed through the FSA. Also, in September 2003 the IRS ruled that money in a flexible spending account could be used to buy non-prescription drugs. In order to be reimbursed for an over the counter drug, the drug must alleviate or treat personal injuries or sickness, such as cold medicines, antacids, allergy medicines, and pain relievers. Expenditures merely benefiting the general health of an individual, such as vitamins or food supplements, are not reimbursable under an FSA.

The ruling is significant because most over-the-counter drugs are not covered by health insurance plans. In addition, some medications that were previously available only by prescription, such as the allergy drug Claritin, are now sold over the counter. Therefore, people who use those drugs can no longer rely on their insurance to pay for them.

With a dependent care account, pre-tax money can be used to help pay the costs of any caregiver providing services while you're at work. This includes the nursery school for kids or the home health aide looking after a disabled spouse.

One of the largest drawbacks to flexible spending accounts is the "use it or lose it" requirement. When you set up an FSA you have to estimate how much you'll spend on out-of-pocket health care costs or dependent costs during the year. If you don't spend all of the money in your FSA account by December 31st, or the end of your plan's calendar year, money left in the account is forfeited. Luckily, you have three months after the end of the calendar year to submit claims for eligible expenses incurred during the previous calendar year. In order to determine how much to contribute to an FSA, make a list of the expected out-of-pocket medical expenses for you and your dependents for the next year. It is always wise to be conservative so you don't risk forfeiting any money.

Employee (personal) assistance programs
To protect employees' mental health and to offer short-term counseling, many companies offer third-party employee assistance programs (EAP). These typically cover the first few visits to a counselor and end in a referral to a counselor whose services may be covered under a group health insurance plan. These services can be a first step for coping with difficult personal issues like work/life balance, family problems, substance abuse, depression, or financial difficulties. By offering an EAP, an employer implicitly acknowledges that those issues may exist for some employees, and signals that counseling is an appropriate step.