Big Changes for Health Plans
Every year, workers are advised to look closely at their benefits package during open enrollment season. This year, they have even more reasons to read the fine print.
Companies are increasingly requiring “active enrollment” -- meaning that if employees don’t check the right boxes, they could end up without health insurance, or find themselves enrolled in a “default” plan.
“More and more companies won’t allow passive enrollment, which is when they don’t hear from you, they give you what you had last year,” said Tom Billet, senior consultant with benefits firm Watson Wyatt Worldwide. “Companies are increasingly demanding active enrollment.”
One reason is that benefit choices are changing significantly this year. That’s partly because laws have changed to allow new options such as health savings accounts. It’s also because employers are experimenting with ways to cut costs, which have more than doubled in the last eight years, according to benefit consulting firm Hewitt Associates.
“We are seeing increased deductibles, but also more of a consumer-oriented focus to healthcare,” said Sarah Taylor, annual enrollment leader at Hewitt. “There are a lot of plans that weren’t offered in the past -- like health savings accounts and build-your-own plans.”
The most common of the cost-cutting experiments involve “health risk assessments,” said Barry Barnett, a principal in the human resource service group at PricewaterhouseCoopers.
These assessments, which are offered either through online questionnaires or in-person physical examinations, aim to ferret out potential health problems that could be managed or prevented with appropriate care. In some cases, the assessments are followed up with recommendations for exercise, stress management or programs to help people lose weight or stop smoking, he added.
“Having employees become more aware of their health status, and providing them with programs to help, should help reduce healthcare costs over the long term,” Barnett said.
Some employer health plans will require everyone to take the risk assessment, and others will provide an incentive. At the U.S. division of pharmaceutical giant AstraZeneca, for example, employees will be able to avoid a $50-a-month increase in premium costs if they take the risk quiz, said Kristine Duckett, a spokeswoman for the company.
A change in tax laws has spurred the growth of health savings accounts, which were made possible by a law enacted at the end of 2003. Since then, an increasing number of insurers have launched the plans, and employers are now set to offer them to millions of workers.
Health savings accounts marry a high-deductible insurance plan with a tax-free savings account that can be tapped to pay the deductible and other uninsured medical bills. Any money left in the savings account at year-end can be saved for future medical costs. If those costs never materialize, the accumulated savings in the account eventually can be used for retirement.
The plans are not a great choice for young families and those with lots of regular medical bills, Billet said. But they’re ideal for the healthy and the wealthy. Both of those groups could presumably afford to pay unreimbursed medical bills out of their pockets, while allowing their tax-free health savings accounts to grow, he said.
But even those who don’t choose a health savings account are likely to see their insurance deductibles rise, Billet added. Another sweeping trend this open enrollment season is what Billet refers to as “back-to-the-future” plans -- insurance programs that require consumers to pay a deductible each year before getting reimbursed for any medical bills.
The back-to-the-future moniker refers to the fact that this was the common formula for healthcare back in the 1980s, before deductible-based “indemnity” plans were widely replaced with health maintenance organizations and preferred provider organizations. In HMOs and PPOs, consumers rarely faced deductibles; they made small co-payments with each doctor or hospital visit.
Now deductibles are back, but they often are coupled with some aspects of the HMO and PPO programs, such as networks of physicians and other providers who charge the plan’s participants less than outside providers, he said.
Taylor says she is seeing more “build your own” medical choices too. These allow the worker to pick such things as the size of the deductible, the amount of prescription coverage and the type of coverage (a plan with a provider network or an open plan that allows visits to any doctor or hospital).
“You mix and match, and your premium would be based on the things that you choose,” she said. “It’s really up to the employee to figure the benefits that have the most value to them.”
Many employers are offering evaluation tools to help workers make choices, Taylor said. Almost every employer in Hewitt’s annual survey of big plans said they provided “healthcare cost estimators” either on paper or on their websites.
For employees who don’t have an easy way to calculate the costs of their options, the Financial Planning Assn. has teamed up with Aetna Inc. to offer a health expense calculator on the Web. Their site is www.planforyourhealth.com.
“It’s the rare plan today that has no change from year to year,” Billet said. “So making the same election that you made last year may not be the best decision. It’s a really good idea to evaluate the situation with a fresh eye.”
Kathy M. Kristof, author of “Investing 101” and “Taming the Tuition Tiger,” welcomes your comments and suggestions but regrets that she cannot respond individually to letters or phone calls. Write to Personal Finance, Business Section, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012, or e-mail kathy.kristof @latimes.com.
