Neglecting health plan could prove to be costly

PERSONAL FINANCE

October 01, 2006|By EILEEN AMBROSE

We're couch potatoes not just about 401(k)s, leaving investments unchanged for years. We're that way about health care plans, too.

Workers usually get an opportunity to switch health benefits during the annual open enrollment period. Last year, about 70 percent chose the path of least resistance, a default option that usually keeps them in their same plan, according to Hewitt Associates' review of enrollment data on nearly 6 million workers.

This could be a sign that workers are happy with the way things are. Benefits experts suspect another reason. Workers are either too busy or too overwhelmed to wade through the array of increasingly complex health care options.

"We're a convenience society. We are looking for things to be easy," said Sara Taylor, Hewitt's national annual enrollment leader.

But there's a risk to putting health care on autopilot.

Your plan might have changed over the years, and you no longer have the coverage you think. Maybe more limits have been placed on rehabilitation or mental health benefits, or you might be required to pick up a bigger share of the prescription drug tab.

Or, your medical needs might have changed and the old plan is inadequate. For example, if you're starting a family, you will want to check out how well the plan covers prenatal care and labor and delivery.

A variety of health care options also have been introduced in recent years. You can be missing out on a better plan by sticking with the same one year after year.

"The right decision can save a person hundreds or thousands of dollars, and the wrong decision can cost them equally," said Tom Billet, senior consultant with benefits consultant Watson Wyatt Worldwide.

And if you still need a reason to annually review benefits, consider:

More employers are requiring workers to actively select a plan, partly to encourage them to weigh benefits and help control costs, Taylor said. Workers failing to pick a plan can end up in one chosen by the employer, or in rarer cases, lose their insurance, she said.

Open enrollment season kicks off this month for millions of people. If you're one of them, you likely will be bombarded soon with plan information.

Changing needs

The first step is to look at how you used your benefits last year and how that might change in the next year. Needs change over time, so your plan might have to, too.

"You should choose a plan that fits your lifestyle," said Dr. Charles Cutler, co-author of Navigating Your Health Benefits for Dummies.

A healthy 20-year-old could be well served by a lower-cost plan with limited coverage, but that might not be adequate for couples starting a family or someone nearing retirement, Cutler said.

Don't assume that you already know everything about your current plan. Employers routinely tweak benefits trying to contain costs.

"I don't think [workers] realize how many changes can occur year to year," said Kathleen Stoll, director of health policy for Families USA.

Workers are most likely to notice changes in premiums, which have been rising. Kaiser Family Foundation said last week that premiums on average went up 7.7 percent this year on workplace plans.

But you might be paying more than that - in other ways. For instance, co-payments for doctor visits have been creeping up in the past three years, shifting from $15 to $20 among the most common plans, according to Kaiser.

Prescription costs

And you might be asked to foot more of the bill for prescription drugs. Workers' share of drug costs often depends on whether they buy generics or brand names. But some plans are adding another cost tier that requires employees to pay more for certain pricey drugs, said Gary Claxton, vice president with Kaiser.

Also, if you like your doctors or are partial to a hospital, make sure they are part of your plan's network. Doctors might be dropped from an old plan or might not be part of a new plan's network, Claxton said.

You might also see some new options and features if you haven't looked closely at benefit offerings in recent years.

More workers can expect to see high-deductible plans that can be paired with a health savings account.

With this, workers can save a certain amount of money each year in their health account and not pay taxes on it as long as the cash is used for medical costs. Deductibles this year must be at least $1,050 for singles and $2,100 for a family. With high deductibles come lower premiums.

Unspent money each year remains in the account, growing over time. When workers leave the job, their accounts go with them.

The accounts are supposed to prod workers to shop for health care to keep costs down. To encourage participation, about 60 percent of companies offering this option contribute money to workers' accounts, Claxton said.

Do the math

But workers need to do the math to figure if the account is financially worthwhile based on their health care use and how much money they could end up paying out of pocket.

Open enrollment typically lasts two to three weeks, said Hewitt's Taylor. With so much to consider, workers need to get an early start on reviewing their health package, she said. "Don't wait until the last minute."

To suggest a topic, contact Eileen Ambrose at 410-332-6984 or by e-mail at eileen.ambrose@baltsun.com. Podcasts featuring Ambrose can be found at baltimoresun.com/ambrose

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