MONEY

Open enrollment season is here: Choose your plan wisely

Despite the recent rollout of government-regulated insurance exchanges, employer-offered plans will be the most cost-effective option this year for the majority of workers.

One thing health reform hasn’t changed: If you work for a company that offers health insurance, you still have to go through the annual fall ritual of selecting next year’s benefits.

Despite the recent rollout of government-regulated insurance exchanges, employer-offered plans will be the most cost-effective option this year for the majority of workers, says Katy Votava, president of Goodcare, a firm that advises people on health care decisions.

But that doesn’t mean you should just stick with the same plan as last year. Companies have been tinkering with coverage in response to continued increases in health care costs and the expected impact of reform. (Sixty percent of employers say the new tax on high-cost health insurance will affect their plan design within the next two years, HR consulting firm Towers Watson reports).

The result, says Helen Darling of the nonprofit National Business Group on Health, is that “more of your money is at stake than ever.”

Read on to learn about the key trends that will shape your coverage in the coming year and to find out how they should shape your open-enrollment decisions now.

Costs for you are up again

Cover just yourself? While 38% of employers planned to decrease or keep steady employees’ premiums, 40% planned to increase workers’ tabs by up to five percentage points and 22% by five or more, Towers Watson found.

Even if your premiums don’t go up, your out-of-pocket cost is likely to be higher, as deductibles are expected to rise noticeably. “Last year, among large employers, there was a 13% increase in deductibles — one of the sharpest we’ve seen in a while,” says Beth Umland, a director of research at HR consultancy Mercer. “It seems like employers are using the deductible as a way to keep plan costs down.” In addition, she says, you could see higher co-pays to visit specialists.

What to do: Take time to compare plans, since your 2013 choice may no longer be the most cost-effective. Estimate your total expenses — premium, deductible, and co-pays or co-insurance — under each, based on this year’s usage.

Best case, your employer will offer a web tool that pre-populates your data. Be sure to check whether your doctors are in network and regular meds are covered on any new plan.

To ease the bite of increasing costs, take advantage of a flexible spending account. You can stash up to $2,500 pretax for medical expenses in one. In the 28% tax bracket, it takes $3,472 after-tax to pay for that amount of care.

Spouses get no love

Have dependents on your plan? “Employers want spouses or partners to consider any other coverage they might have,” says Craig Rosenberg, practice leader for benefits consultancy Aon Hewitt.

So some companies are requiring spouses that have the option of other coverage to take it. A few are excluding spouses altogether; UPS recently made headlines for doing so.

More commonly, companies are upping the price to insure partners, through spousal surcharges or by creating different rates for different combinations of family (employee, employee plus spouse, employee plus children, and so on).

About a third of firms are hiking premiums on family coverage five percentage points or more, vs. 22% doing so for singles, Towers Watson says. Also, family deductibles are going up at a higher rate than employee-only deductibles, Mercer reports. In sum, your out-of-pocket cost for family coverage could be two or three times what it was a few years ago, says Cynthia Weidner, a VP at health care consulting firm HighRoads.

What to do: Consider splitting up — your coverage, that is. If your spouse’s company also offers insurance and the premiums plus the deductibles for each of you going with your own employer add up to less than the premiums and deductibles for both of you on any single plan, you’ll probably do better diverging.

Families with kids should compare the cost of covering children first on one spouse’s plan, then the other spouse’s plan, then with full-family coverage on each plan.

High time for high deductible?

Now likely to be on tap from your employer: a high-deductible health plan — that is, one in which coverage doesn’t kick in until you’ve shelled out at least $1,250 for singles and $2,500 for families.

An HDHP is usually paired with a tax-advantaged health savings account into which you can sock away money for out-of-pocket costs. In 2014 individuals can contribute $3,300, and families $6,550; those over 55 can add another $1,000.

High-deductible plans are far cheaper for companies than HMOs and PPOs. So while only 11% of companies offered an HDHP in 2004, 66% will this year, Towers Watson says; another 13% are expecting to offer one next year. And though 85% of businesses offering HDHPs today present another option, nearly a quarter of companies plan to make this the only choice by 2016.

What to do: Use the tool at wageworks.com/HSACalculator to see if an HDHP will save you money. Have young kids or a condition that requires you to see doctors often? Stick with a PPO or an HMO if you can, to minimize the cost per visit.

But if you and your spouse are healthy and don’t see doctors much, a high-deductible plan probably makes sense, says Darling. “This is especially true if your PPO has individual deductibles.”

Preventive services tend to be covered in full, and once you hit the deductible, coverage is like that of an HMO or a PPO. Also, nearly half of employers help fund employees’ accounts, says Towers Watson, and unused money rolls over year to year — so you could well end up ahead.

Proof of wellness required

Two-thirds of companies now offer financial rewards (typically cash or contributions to tax-advantaged accounts) to workers who fill out health questionnaires or undergo screening tests for conditions like high blood pressure. Recently, however, firms have begun implementing outcome-based incentives, meaning you have to prove you’ve changed a behavior — lost weight, say, or quit smoking — to score a reward.

Nearly half of employers say they’ll go this way by 2016, Towers Watson reports. Some firms even levy penalties, like higher insurance premiums, if workers don’t modify the behavior.

What to do: Take advantage of low-hanging fruit (filling out a form or taking a test), and seek help to make any changes required to reap awards. Ask your employer if there is a support group or counseling available.

More perks — at a price

Increasingly, firms are fleshing out open-enrollment packages with a variety of other benefits. Typically these are offered for purchase at a group rate. Most common: legal assistance (55% of large firms offer it, Towers Watson reports), financial counseling (44%), long-term-care insurance (36%), critical-care insurance (35%), and travel-accident insurance (30%). Some firms even offer concierge services that will, say, pick up your dry cleaning.

“Companies are thinking, ‘We’re reducing on health care. What could we offer instead?'” says Towers Watson health care practice leader Ron Fontanetta.

What to do: Assess each based on whether you’re likely to avail yourself of the service. The group rate should be significantly less than you’d pay on your own. So if you’re planning to, say, rewrite your will, the legal counseling may be worth the cost. Otherwise, skip the extras — and apply the money to your rising health care tab.

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