Monday, November 17, 2008

Health Care and Open Enrollment

Now is the time of year that many companies are going through the time honored employer tradition called "Open Enrollment." Businesses are offering their workers health insurance options that may or may not be what the employees want but must choose to participate in before year end if they want to be insured and whether to include any dependents. According to CNNMoney.com, from October to November every year, millions of Americans must select health insurance and other benefits at work. Each year the choices get more complex and the financial consequences get bigger. For 2009, nearly half of companies plan to push more health-care costs onto employees, often in less than transparent ways as reported by Mercer. There will be higher premiums, of course - on average, 8% higher, according to Hewitt. Also, they report you should expect increased deductibles (what you shell out before benefits kick in), co-pays (flat fees at the doctor or pharmacy) and co-insurance (your percentage of the bill in other cases).

Most likely, according to CNNMoney, your options will fall into four categories: There's the familiar health maintenance organization (HMO), which typically requires you to use approved doctors and hospitals. Then there are the preferred-provider organization (PPO) and point-of-service (POS) plans, which give you the option to see an out-of-network doctor for a higher price. And this year your employer may join the increasing number of firms offering a high-deductible plan tied to a tax-free health savings account (HSA), a low-premium option that provides limited benefits until you spend a certain amount out of pocket.

All the more reason to consider every option according to CNNMoney. Use this strategy to pick a plan that gives you value for your health-care dollar - without putting your finances at risk. Here are the steps to follow when considering a plan during open enrollment:

Step 1: Separate the apples from the oranges.
Start by deciding if the high-deductible plan with an HSA is right for you. This may be the first time you've seen such a plan. At first glance, it will stick out the most with its comparatively low premiums - for 2008, employees paid an average of $2,330 for family coverage vs. $3,340 to $3,730 for the other plan types, reports the Kaiser Family Foundation. In exchange for this price break, families in these plans typically face deductibles from $2,300 to $10,000. (The average in 2008 was $3,910, compared with $1,340 in a PPO, according to Kaiser.) Many of the plans cover preventive care at 100%. But for everything else, you pay in full until you hit the deductible, after which the plan usually functions like any other. To cover out-of-pocket costs, you can save pretax dollars - up to $5,950 in 2009, plus a $1,000 catch-up for those 55 or older - in the HSA. Your employer may also contribute. The money rolls over year to year and can be taken out for any purpose at age 65, though it's taxable if not used on medical costs. (Note: Not all high-deductible plans qualify for an HSA. Your plan paperwork should say if yours does.) Intrigued? Understand this: Signing up for this type of plan is essentially making a bet that you'll stay healthy. You'll probably save money over traditional plans while you're well, but you'll likely spend a lot more if you get sick. (Figure that you could owe the whole deductible in one pop if you're hospitalized.) So if you have young kids, a costly chronic condition or a family history of a debilitating disease, you're likely better off with the other plan types. Usually high deductible plans make the most sense for those who are young and healthy, but they can also offer financial benefit for wealthy empty-nesters who want to take advantage of the tax savings and can handle a financial surprise. In fact, anyone who is interested in this plan type should make sure they can afford the deductible -if you get sick before your HSA reaches that amount, you'll have to come up with the cash. Eliminate this option if you don't have the funds.

Step 2: Narrow the oranges.
Skipping the high-deductible plan? To make sense of your leftover options, which are more similar in the way they operate, start with two questions: Are your doctors in-network? And would you ever want to go out of network? First, unless you're willing to switch providers, search the insurers' Web sites or simply call your doctors and hospitals to find out if they accept the plans you're considering. With an HMO, you'll typically have to use doctors on the list; with a PPO or POS, using out-of-network doctors will cost you significantly more. Either way, you may want to jettison any plans that your favorite docs don't participate in. As to the second question, if you'd rather not be restricted from seeing, say, the top oncologist in your state if he's not on your plan, you may want a more flexible PPO or POS. Also, note that HMO and POS plans generally require referrals to see specialists. If that bothers you, you may want to go PPO.

Step 3: Zero in on key costs
If you still have multiple plans on your list, compare their main terms. Premiums on HMO, PPO and POS plans can be similar, but the plans' less-transparent costs vary widely. If your company hasn't done so for you, chart out the costs. Turn an 8½-by-11-inch page on its side and write plan names along the top and the following terms down the left. Fill in details for each, making sure to note, where appropriate, how costs differ in and out of network; include what counts toward deductibles and maximums. Don't forget to consider the following:
--Premium
--Deductible
--Co-pays and co-insurance
--Prescription coverage (Confirm that the plan covers your current meds.)
--Out-of-pocket maximums

Step 4: Pick your final answer.
If the choice isn't obvious after comparing plans, calculate your costs on each using a guesstimate of last year's health-care usage. Then see how much it would run if you needed a lot more care. (Your employer or the plan sponsors may offer online calculators to make this math easier.) The main thing to consider in making the final pick: You want a plan that you'll be able to afford, whether you're healthy or unhealthy. Whatever you do, don't miss the sign-up deadline. More companies are defaulting workers into high-deductible plans instead of their past year's choice. Meaning: Unless you're hale and hearty, indecision could be costly.

So if you have more than one health care plan to choose from, review your options, don't just blindly renew according to CBSNews.com. Make sure you're in a plan that is right for you both in terms of coverage and cost. And take advantage of Flexible Spending Accounts. More workers need to take advantage of these really great accounts. These accounts allow you to use pretax dollars to pay for healthcare costs not covered by your insurance. This includes your deductible and co-payments, but also can include things like eye glasses, over the counter medications, stop-smoking programs and so on. The one catch here is that this is a use-it-or-lose-it proposition: you need to use the money in roughly a one year period or you lose it. So, be conservative, but don't skip this option altogether. Also, max out your Dependent Care Account and Transit Accounts. These are different types of flexible spending accounts. One lets you use up to $5,000 in pretax dollars to pay for the daycare costs of a child that's under age 13, or an elderly parent who lives with you who also needs daycare. The other type of account lets you use pretax dollars to pay for commuting and parking costs. If you're offered these types of accounts and you have these types of expenses, it's a no-brainer. Something else to consider is the Roth 401(k). Employers have been slow to embrace this new twist on the traditional 401(k) plan. But thanks to some tax code changes we're finally starting to see them rolled out. Like a Roth IRA, these accounts are funded with after-tax dollars, but withdrawals taken during retirement are completely tax free and that's a big gift from the government. These are a great option for younger workers. And no matter what, try to increase your 401(k) contribution for 2009. And finally look for other fringe benefits. Gym discounts, discounts on cell phone providers and discounts for buying a hybrid car. Many employees, especially big ones, offer all kinds of employee perks. Find out what's available. Taking advantage of these options is like getting a little raise and with no added work.

According to BenefitNews.com, the open enrollment period happens on an annual basis. It’s easiest to coordinate with your providers to make sure that open enrollment for each coverage plan falls at the same time of the year, rather than have different open enrollment times for every plan. Most plan providers won’t let you or your employers make a change unless there’s a qualifying event. The main qualifying event is defined by the IRS as an event that:
--Marriage;
--Birth;
--Adoption;
--Divorce or legal separation;
--Death of spouse or dependent.

Usually open enrollment covers insurance plans such as health, dental, vision, life, accidental death & dismemberment, short term disability and long term disability according to BenefitNews.com. It also covers any additional voluntary or supplementary plans your company may offer. Employees can choose:
--To start coverage if they don’t have any;
--Change from one plan to another, if that option is available; or
--Drop coverage completely, if that’s an option

Employees need the option to choose from one of those plans, or to choose none at all. That’s what open enrollment is all about. Do your homework early and find out what option works best for you. Make sure that your employer has provided all the information you need to make a wise choice for your employer sponsored health care plan. Knowledge is power. Be informed. Choose wisely.

Until next time. Let me know what you think.

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