It’s the time of year for leaves, baseball, and 30-page open enrollment guides*. If you’re a prospective employee, “we offer benefits” doesn’t have the precision on the scale of value as does a first class flights to Europe. “We offer a free first class direct flight to London. Travel dates and times are flexible. Towels and champagne.” Some could be peddling the 5-day steamship product as if in the same class.
For 95% of people, what matters is the dollar value of healthcare benefits. How much is the London trip worth? Is it generous, and do I have to pay much out-of-pocket? This can vary wildly by employer and even by coverage tier.
The graphic below reflects a set of large finance firms with benefits normalized and contributions adjusted to reflect platinum level coverage (10% cost sharing on average). The green dot is the first class ticket to London–both single and family coverage are generous; single coverage is negative due to account contributions. The red dot is the 5-day steamship, both coverage tiers are stingy. Family coverage will cost you about $15,000 dollars while $6,000 per year is more typical.
On plan selectionIf you’re offered a menu of plans, unless the prescription drug benefits are dramatically different, it’s almost always better to take the higher deductible plan. Adverse selection means sicker and needier people (e.g., I’m having surgery in the first quarter of next year and want the lowest out-of-pocket up front) will choose the richer plans, and the premium differences will more than make up the cost sharing differences. Just make sure you save the difference in premiums.
Dental and Vision
Dental and vision are gifts to those industries and are about taxes and filling appointment slots. Insurance is usually there to protect against big tail risks (rare) events. Why do we have vision insurance for something that has a capped benefit at $200/yr–roughly what a Netflix subscription costs? If dental and vision is offered, and it’s cheap to you, take it. Just don’t be surprised if you have to pay 50% of the cost of a porcelain crown.
Good enough
It’s time we recognize the truth of not everyone being above average. Not every firm is actually looking to attract and retain “top” talent. As variation in pay and benefit values show, many are clearly seeking good-enough talent. There are, of course, mismatches, where a firm could be generous with salary, career growth, but mediocre with benefits. The employees who know how to recognize top benefits, and negotiate adjustments to pay to make up the differences, will be leading with a great analytical foot forward.
*Bank of America’s is brief at 12 pages. The header image is from the guide.
