What to Know Before Choosing Health Benefits

MarketWatch

Before the holidays arrive, many U.S. workers will face an increasingly high-stakes decision in choosing their health benefits for 2008.

With out-of-pocket costs up dramatically since 2000, the 158 million Americans who rely on private, job-based insurance would be wise to avoid defaulting automatically to whatever coverage they have this year, experts say.Employers often switch health-plan vendors or change cost structures within the plans they offer, which can affect employees' monthly insurance premiums, deductibles, copayments and doctor networks, said Tom Billet, a senior consultant for human-resources consulting firm Watson Wyatt, in Stamford, Conn.

Workers' health status and family situations also change year to year, making investing an hour or two to compare plan options worthwhile, he said.

"If they're making smart choices, it could save them hundreds or even thousands of dollars a year," Billet said. "If they make bad choices it could be very costly."
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Among the trends experts advise watching for are employers:

-- Charging more to cover dependents compared with employee-only coverage or more closely scrutinizing dependents' eligibility.

-- Imposing a spousal surcharge if a worker's spouse has coverage available elsewhere.

-- Using financial incentives to encourage good health behaviors or take a personal health risk assessment; more rarely, some employers are using penalties to discourage habits such as smoking that correlate with poorer health and lower productivity.

-- Fully funding preventive care benefits such as immunizations, flu shot clinics and age-appropriate cancer screenings.

-- Offering plans with lower contribution requirements and fewer covered benefits to encourage lower-wage workers to stay insured.

-- Promoting nurse advice lines, health coaching and disease management programs.

-- Offering "consumer-driven" health plans that typically have high deductibles and encourage workers to be more price-sensitive.

The choices at this time of year can be so vexing that tech giant IBM is extending its one-year-old MoneySmart program -- available to help the company's 128,000 U.S. workers with financial and retirement planning -- to include health-insurance decisions as well, said spokeswoman Laurie Friedman.IBM (IBM), based in Armonk, N.Y., will offer workers educational seminars, online tools and free one-on-one planning sessions with independent financial experts, she said. "This is an easy, quick way to evaluate your health-care options."Weighing incentives
Escalating health costs and the steady erosion of employer-sponsored coverage have caused concern among workers, employers and government alike. Workers are increasingly strained to pay for rapidly rising health-care inflation because their wage increases have fallen far behind by comparison.At 6.1% on average, growth in health-care premiums moderated this year, according to the Kaiser Family Foundation. But premiums for family coverage have jumped 78% since 2001, while wages have risen 19% and inflation has gone up 17% in that time.For large companies, the average per-person health cost is projected to rise to $8,676 next year from $7,982 in 2007, according to Hewitt Associates. Workers will be required to contribute $1,859 in 2008, or about 21% of the overall premium, up from $1,690 in 2007.Among those feeling the biggest squeeze are low-wage workers, families and older people who want to retire but don't yet qualify for Medicare, said Ron Fontanetta, principal with Towers Perrin in New York.But some companies are offering plans with lower contribution requirements, particularly in sectors such as retail, hospitality and financial services that have a higher portion of low-wage workers and an average 25% rate of employee nonparticipation in health plans, he said."As employers have taken notice of this, they are attempting to design and offer at least one option that has a much lower price point and level of contribution to help those who have trouble making contributions to be able to continue to participate in the employer plan."More companies also are offering financial incentives such as a break on premiums for workers who take part in wellness or fitness programs. "There's a much greater focus and attention on the part of employers to build and maintain a culture of health," Fontanetta said, either by helping to preempt disease in vulnerable populations or aiding those afflicted in managing ailments such as diabetes and high blood pressure.IBM is expanding its Healthy Living Rebate Program, in which workers can receive up to $300 in cash per year if they take a health risk appraisal or participate in smoking cessation, exercise or weight loss. For next year, workers who take the health risk appraisal will face gender-specific questions related to each sex's health management issues.Several employers are tacking on monthly surcharges for smokers, though in most cases employees can avoid the fee if they enroll in the company's smoking -cessation program, Billet said.One such employer is Tribune Co.(TRB), which owns the Chicago Tribune and the Los Angeles Times, among other media properties. Starting in 2008, it will initiate a fee of $100 a month for any of its 20,000 workers who use tobacco -- and any of their dependents who do -- in an effort to promote wellness and contain health-care expenses, said Gary Weitman, vice president of corporate communications."Estimates are that tobacco users cost companies on average $5,700 more per year than non-users," Weitman said in a statement. Workers who complete a new company-funded stop-smoking program won't be subjected to the extra fee.Preventing overspending
Patton Boggs, a Washington-based law firm, is just starting to look at wellness programs and health-related financial incentives for its 1,000 employees, said Theresa Perry, benefits and retirement plan manager.For next year, the firm plans to offer three PPOs from UniCare, a subsidiary of WellPoint, and a health savings account (HSA), a tax-advantaged vehicle paired with a high-deductible health plan that lets workers save money to cover health expenses.Of the PPO options, one will cover 80% of the costs for in-network services and 60% for out of network services while another offers a 90-70 split, Perry said. "We usually recommend that PPO for the folks who have either kids in [college] or do a lot of travel because it pays the greatest benefit out of network."The HSA option was open only to partners in 2007 but will likely roll out companywide for 2008, she said. Educating workers, especially those in modest pay grades, will be a big factor because many aren't comfortable with the unpredictability, she said."They don't have as much to put in and when you start to see the true cost of pharmaceutical benefits, the true cost of those drugs, it's astronomical," Perry said. "If you have a child with asthma or a diabetic, the costs to manage those diseases are very expensive."

The family HSA means total potential out of pocket exposure could reach $30,000, she said.

"In a catastrophic event, you'd pay the first $10,000 deductible," she said. "If you're in an out-of-network facility, you're going to pay 30% of that bill, up to a maximum of $20,000."So far most employers are offering such plans as an option as opposed to a replacement, Billet said. For many people in traditional plans, it pays to fund a flexible spending account for at least the amount of the deductible and half the expected out-of-pocket expenses, he said. He also advised those who can afford it to accept a higher deductible."Probably a lot of people, especially if you're healthy, would do better to take a plan that has more cost-sharing at the time you use the service and less cost-sharing through the premium," he said."You should only pay to insure the risk you can't bear," he said. "If you're paying for risk you can bear, I would suggest you're paying for something you don't need."
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