http://www.nytimes.com/2009/10/17/health/17patient.html
By WALECIA KONRAD
Published: October 16, 2009
And now comes the pitch: What can you do to reduce health care costs?
During the open enrollment season for employee benefits, now under way for next year, you are likely to hear a whole lot about Consumer-Directed Health Plans. You, of course, are the consumer. And you’re being directed to save your employer a lot of money — so much so that many employers are offering workers lucrative incentives to make the switch into a consumer-directed plan.
Should you bite? And if you don’t have a choice — General Electric, for example, is forcing 75,000 of its salaried employees in the United States to choose one of three consumer-driven options — how can you best navigate this new landscape? In this column we’ll offer the latest expert advice. But first, some background.
Consumer-directed health plans, in essence, are high-deductible health insurance. The plans charge a high annual deductible — starting at $1,200 for single employees and $2,400 for families in 2010 — in exchange for lower monthly premiums. And in many cases, there is also a tax break.
The idea behind the “consumer directed” part goes like this: If you and I are spending more of our own money on health care, then we are likely to ask doctors and hospitals many more questions upfront and be more careful about which tests and procedures we receive. After all, until we exhaust that high annual deductible, it’s our money on the line.
Employers are pushing these plans because they can save the company as much as 20 percent, compared with traditional insurance. The number of workers enrolled in high-deductible plans at companies with more than 200 employees reached an estimated 22 percent in 2009, from 10 percent in 2006, according to a study of more than 2,000 companies conducted by the Kaiser Family Foundation.
Most corporate high-deductible plans come with a health savings account, which allows employees to deposit tax-free dollars to help offset the higher out-of-pocket costs. A person can sock away up to $3,050 in 2010 in these accounts, $6,150 for a family. Many companies will contribute a lump sum to your account — anywhere from $500 to $1,000 — as an incentive for you to sign up for the plan.
The tax break on these accounts can be considerable, in theory at least: You deposit any contributions pre-tax, and any earnings grow tax-free, and there is no tax when you withdraw funds to pay for eligible health care expenses.
Unlike the lose-it-or-use-it flexible spending accounts, any health savings money you do not use one year rolls over into the next. And because a health savings account is in your name, you take it with you — along with any employer contributions — if you leave the company.
Another common health savings account, especially at smaller companies, is called the Health Reimbursement Arrangement. These accounts can be linked to any type of health insurance policy but are most typically used with high-deductible plans. This account is totally financed by the company. Your employer earmarks a certain amount of money for you to help pay higher health care costs, and it is up to the employer to decide if it will credit any interest earned to your account or if the money will roll over from year to year. In most cases, you cannot take this account with you if you leave that job.
Some employers offer only the high-deductible plan itself. In that case, if the policy meets certain government regulations, you can set up your own health savings account. For more information on how to do that, go to www.treas.gov/offices/public-affairs/hsa/faq_setup.shtml or check with your bank, which will often help you set up an account. Also, check with your human resources department to see if it will set up a direct deposit arrangement for your account.
O.K., so there’s the primer.
What may happen with such insurance offerings in the future, after Washington gets through rethinking the nation’s health care system, is anyone’s guess. But for now, you’ve got to plan what you want your own personal health care system to look like starting in January. So consider these factors before taking the high-deductible plunge:
HIGH-DEDUCTIBLE VS. TRADITIONAL PLANS If your company is still offering both alternatives, here are some questions to ask yourself to help compare the two choices.
What are my health expectations this year? Young, relatively healthy people can benefit from the lower premiums a high-deductible plan offers (usually about 20 percent less than traditional insurance), while still having coverage in a medical crisis.
But if you have a chronic condition like asthma or diabetes, or you know you’re headed for, say, knee surgery come January, you’ll need to sit down and do the math to figure out which plan will cost you more money, says Dean Hatfield, a senior vice president at Sibson Consulting. And here’s a surprise: It won’t always be the high-deductible plan.
That is because many employers are raising premiums on traditional H.M.O. and P.P.O. plans as a way to further encourage employees to pick the high-deductible option. So those higher premiums might come closer to offsetting the higher out-of-pocket costs of the high-deductible plans.
What’s more, high-deductible plans that qualify for a health savings account must meet government regulations limiting the amount you’ll pay out of pocket. For 2010, those limits are $5,950 for individuals and $11,900 for families, including the cost of the deductibles. (Be sure to check the policy’s benefits summary for out-of-pocket maximums.)
How much can I afford to contribute each month? If you don’t have an extra cent to put into some kind of health savings account, the savings from the lower premiums on the high-deductible plan will typically not be enough to compensate for your out-of-pocket costs for any unexpected emergencies. If something drastic happens, you may quickly find yourself in debt. These plans work best for people with enough discretionary income to finance their plans, says Gary Claxton, a vice president at the Kaiser Family Foundation.
Where are my doctors? The high-deductible choice may use a different network of health care providers than the insurance plan you use now. You’ll want to make sure you can still see your doctors and other health care providers.
On the other hand, your employer may be changing the other network options as well. And so you may find your doctors are more accessible through the high-deductible offering than the new P.P.O.’s or H.M.O.’s that you might have to switch to, anyway. The only way to know for sure is to check.
SAVINGS ACCOUNTS VS. REIMBURSEMENT ACCOUNTS In most cases, employees won’t have a choice between these two savings vehicles. Most employers offer one or the other.
But if your company happens to offer both, as General Electric is doing, the decision may boil down to how long you think you’ll be with that employer. If it’s long enough to take advantage of the company-financed reimbursement account for the year’s deductibles, then you may want your employer to pick up the tab. If you know you’re going to make a change soon, though, or you’re worried about your job stability, the portable health savings account with a company contribution and its tax advantages may make more sense.
EMPLOYEE INCENTIVES Beyond contributions to your health savings account, some employers are offering other incentives that may be easy to overlook, Mr. Hatfield said.
For instance, employers in recent years have been pushing workers to fill out health questionnaires and even offering an extra $100 or so in contribution to their health savings accounts if they comply. This year, however, you may receive the bonus only if you and your spouse both fill out the questionnaire, Mr. Hatfield said. Be sure to read all of your enrollment materials carefully, and don’t be afraid to call your benefits department and ask what incentives are available.
Next week, as Patient Money continues to guide you through open-enrollment season, my colleague Lesley Alderman will offer advice for employees who find they are forced to switch health insurance plans.
