LINCOLNSHIRE, Ill. — The economic downturn and rising gas prices continue to tighten the purse strings of many Americans, who are now looking for ways to do more with less. As this year's benefits enrollment season approaches, employees will feel the pinch even more, facing health care cost increases that continue to significantly outpace inflation and pay raises. But according to Hewitt Associates, a global human resources consulting and outsourcing company, employees who take time to do their homework, weigh their choices and make smart trade-off decisions will be in the best position to make their benefits dollars stretch further this year, without having to sacrifice the quality of those benefits.
 
As in past years, Hewitt's research shows employees will have to put more of their own dollars toward their benefits in 2009. Employees' total health care costs, including employee contribution  and out-of-pocket costs, are projected to be $3,826, up 8 percent from 2008, and almost double the rate of inflation and expected salary increases (3.7 percent). Despite the increased cost burden, Hewitt's research shows the majority of employees continue to take a passive role when choosing their benefits, with more than 60 percent defaulting into the plans they selected the previous year.

"Health care costs are a significant expense for many Americans, and with the high price of gasoline, the mortgage crisis and the sluggish economy already pressing heavily on employees' pocketbooks, finding ways to better manage these costs becomes even more critical," said Sara Taylor, annual enrollment leader at Hewitt Associates. "What's surprising is that most workers don't take the time to be savvy health care consumers; they either default into their existing plans, opt for the cheapest plan, thinking they will save money in the long run, or select the richest plan to minimize their out-of-pocket costs, should they need health care services. To truly manage costs, Americans need to put as much deliberate thought into their benefits choices as they would for any big-ticket item. They need to do their research, comparison shop and then select the options that will not only enable them to maximize their benefits dollars, but also best meet their needs and the needs of their families."

To ensure employees get the biggest bang for their buck with their health care and other benefits choices, Hewitt offers employees the following tips this enrollment season:

Do your homework. Your benefits choices not only impact your pocketbook, but also your and your family's overall well-being, so it is important that you take the time to seriously evaluate all of your benefits options and weigh them against your specific needs. In some cases, you might find several ways to cut costs and still receive the level of care that you require.

Carefully look over your benefits selections from last year and assess what worked and what didn't. Did you put enough money in your flexible spending account (FSA), or did you tap that pool of cash well before the year's end? Were the doctors you saw covered under your plan? Are they also covered under a more cost-effective plan? Did you or a family member develop a new medical condition that you need to factor into your health care expenses? How much did you spend in co-pays and other out-of-pocket costs? Most employers provide access to past medical and dental claims that can help you calculate last year's costs and estimate what your future costs might look like.

It's also important to think about any life changes that may impact the benefits you select this year. Are any of your dependents no longer eligible for coverage? Did you or do you expect to add to your family? Asking yourself these questions will help you more closely assess your past needs, estimate your future needs and determine what adjustments you may need to make in your benefits selections.

Use the tools available to you. To eliminate some of the complexities of the benefits selection process, many employers offer several online modeling and estimating tools that help employees compare and make trade-off decisions among their benefits options. Yet surprisingly, most employees do not take advantage of those tools. According to Hewitt research, a vast majority of companies (90 percent) offer health care cost estimators that allow you to comparison shop for health insurance by evaluating two or more health care plans at a time, with consideration for monthly premiums, co-payments, deductibles and coinsurance payments. However, just 9 percent of employees used those tools in 2007.

An increasing number of employers are also providing decision-support tools that enable you to see the benefits selections of others with your similar circumstances and background. Taking advantage of these tools can help ensure that you are making the best choices to meet your needs.

Read the fine print. More employers are changing the rules of the annual enrollment process, and it's up to you to make sure you fully understand if and how those rules may affect you.

In past years, employees were automatically defaulted into the same plan in which they were enrolled the previous year. Today, most workers believe this is still true, which can be a risky—and often costly—assumption. As more employers look to consolidate plans and/or change the designs of their current plans in an effort to cut costs, the plan you chose last year might look different than it does this year. In other cases, not making an active decision during enrollment means you could get defaulted into a health care plan that doesn't meet your needs—or even worse—leaves you with no coverage at all.

Bottom line: Make sure you understand your employer's requirements and take an active role in choosing your benefits coverage to ensure you can meet all of your health and financial requirements.

Assess your family's needs. Hewitt research shows that more and more companies are beginning to look at requiring employees to pay a bigger portion of the cost of coverage for their dependents, either by increasing payroll contributions for dependent medical coverage or by charging higher contributions for dependent spouses/partners to encourage them to take coverage under their own employers' plans.

Therefore, it's important to consider your alternative health care plan options when choosing your benefits this year. Can a working spouse/partner get coverage under his/her employer plan? While it may be more convenient to combine everyone under one plan, you may find it more cost-effective for each of you to take coverage under your own employer health plan if that option is available.

Embrace new health and wellness initiatives and programs. Most companies want you to be healthy and productive at work, and they are willing to put their money where their mouth is. According to Hewitt research, 63 percent of employers provide incentives—most often in the form of credits or lower deductibles—if you and/or your family members pledge to comply or participate in certain health and wellness programs such as those focused on smoking cessation, weight management or physical fitness. In addition, 25 percent of large employers are strongly encouraging their employees to complete a health risk questionnaire (HRQ) before they choose their benefits for the coming year, and many are even offering workers financial incentives to do so. Unfortunately, many employees don't take advantage of these incentives simply because they don't realize they are available. Don't let this happen to you this year! These programs provide you and your family with the opportunity to not only improve your health, but also to cut back on the amount you spend by potentially hundreds of dollars each year.

Take advantage of tax-free benefits. Virtually all employers offer flexible spending accounts and dependent care spending accounts. These accounts provide you with substantial tax advantages since contributions are made before your paycheck is taxed. For example, an average family of four earning a household income of $50,233, and who annually contributes $5,000 into a dependent care account and $3,000 into a flexible spending account, could save as much as $1,800 annually in federal taxes by taking advantage of these accounts. Unfortunately, most employees do not: in 2008, only 23 percent put money in a flexible spending account and just 3 percent contributed to a dependent care spending account.

Think about your long-term finances. When you're trying to make every dollar count, it's easy to put planning for the future on the back burner. But it's important to think about your long-term financial goals and make the necessary plans to achieve them in retirement. Hewitt research shows that nearly half (49 percent) of employees wait until their 30s to start saving for retirement. By investing in your nest egg at an earlier age, you can significantly increase your retirement savings, often by hundreds of thousands of dollars. For example, a 25-year-old earning an average of $45,000, who contributes 4 percent to his/her 401(k) plan, will have amassed $124,000 more in savings by age 65 than if he/she began saving at age 30. Employees who are already actively saving in a 401(k) plan can also significantly increase their savings, simply by contributing just 2 percent more per year.

For instance, an employee who makes an average of $57,000 a year and increases his/her annual 401(k) contribution from 2 percent to 4 percent—which takes just $95 more out of his/her paycheck each month—will have accumulated an extra $81,000 by the time he/she reaches retirement. What's more, that employee will tack on an extra $40,500 by having contributed at a rate high enough to take advantage of his/her employer's company match program.

About Hewitt Associates

For more than 65 years, Hewitt Associates (NYSE: HEW) has provided clients with best-in-class human resources consulting and outsourcing services.  Hewitt consults with more than 3,000 large and mid-size companies around the globe to develop and implement HR business strategies covering retirement, financial and health management; compensation and total rewards; and performance, talent and change management.  As a market leader in benefits administration, Hewitt delivers health care and retirement programs to millions of participants and retirees, on behalf of more than 300 organizations worldwide.  In addition, more than 30 clients rely on Hewitt to provide a broader range of human resources business process outsourcing services to nearly a million client employees.  Located in 33 countries, Hewitt employs approximately 23,000 associates.  For more information, please visit www.hewitt.com.

Catherine  Brandt

,  Hewitt Associates,  (847) 883-1000

Maurissa Kanter

,  Hewitt Associates,  (847) 883-1000