Sorting through the tangle of open enrollment

Tribune staff reporter

More and more, open enrollment in company-sponsored benefits can be a confusing time, with a plethora of choices and additional responsibility falling on employees.

Workers are given a stack of handouts each fall and are asked to choose among medical plans with varying coverage options, allocate pretax dollars to health and dependent care savings accounts, and participate in wellness programs to save money.

The burden of rising health-care costs is shifting from employers to employees. Premiums are being raised and companies are pushing consumer-driven health plans, generally taking the form of high-deductible policies used with health savings accounts.

The theory is that workers will accept a higher deductible for a lower overall premium, and set money aside to help pay out-of-pocket expenses. That approach is designed to make them more frugal health-care users.

A survey on employer-sponsored health care released last month by the Kaiser Family Foundation and the Health Research and Educational Trust found that premiums rose an average of 7.7 percent in 2006. Although less than the 9.2 percent rise in 2005, costs still outpaced a 3.8 percent gain in wages, the foundation said.

One way for employees to tackle their share of the costs is with the health savings accounts, in which money is set aside on a pretax basis and comes out tax-free if used for medical expenses. Employers will sometimes match contributions to a certain level.

Unlike flexible savings accounts, which are funds offered with traditional health-care policies that must be used up each year, HSAs can only be offered with high-deductible plans.

The Kaiser study found that 2.7 million workers were in consumer-driven plans with a savings option in 2006, including those eligible for HSAs.

In 2007, 25 percent of American employers are expected to offer HSAs as an option for their employees, said Brad Arends, chief executive of the Alliance Benefit Group, a Minnesota-based employee benefit consulting and record-keeping firm.

"HSAs are really a marriage of FSAs and 401(k)'s, tied onto insurance benefits," Arends said. Unlike FSAs, unused amounts in HSAs can be rolled over from year to year and from job to job.

Approved in 2003, HSAs had about $1.5 billion in assets by the middle of this year, according to Inside Consumer-Directed Care, an industry newsletter.

While more employers are embracing a consumer-based strategy, not everyone is satisfied.

Sara Collins, an assistant vice present with the Commonwealth Fund, a New York-based think tank, told a congressional panel last month that high-deductible health-care plans can encourage users to delay or avoid obtaining needed care.

In an interview, Collins said a survey this year of those who had the high-deductible health-care plans conducted by the Employee Benefit Research Institute and the Commonwealth Fund shows "a much lower satisfaction rate" with the plans, "particularly with their out-of-pocket costs."

Those who have HSA-qualified insurance plans, which generally have deductibles of $1,050 a year for individuals and $2,100 for families, "are more likely to not fill a prescription, skip a medical test, and have a higher accumulation of medical debt," she said.

Experts say some workers also are becoming confused by all the choices they face. In 2005, only about 30 percent of employees eligible for benefits bothered to change their options, down from 2003, when 36 percent of eligible employees actively chose their coverage, according to a study for Lincolnshire, Ill-based Hewitt Associates.

"Benefits enrollment has become very complex," said Sara Taylor, national enrollment leader for Hewitt.

Employees who fail to choose "are defaulted into something," she said, generally into whatever coverage they had the year before, which helps explain the low number of active selections.

But some companies default their passive participants into employer-chosen health plans, "generally less expensive, high-deductible plans," Taylor said. And some employers just eliminate coverage for workers who do not enroll.

"The best thing to do, like it or not," is for employees to evaluate their choices, Taylor said.

-- Using a health savings account

Jon Kessler, CEO of WageWorks, a benefits consulting firm based in San Mateo, Calif., said that while three in five Americans now put money away for health-care expenses, only one in five save those funds in tax-preferred HSA or FSA accounts.

This year, more employers are focused on making sure workers understand their benefits, Kessler said. He attributed that push to the passage of the Pension Protection Act, which gave providers a "green light" to help employees make better choices.

The WageWorks Web site,, can help employees make informed FSA and HSA selections. Another site,, sponsored by the trade group America's Health Insurance Plans, offers information in its learning center.

Kessler uses a "spender versus saver" comparison to help consumers determine whether they should use a flexible spending account (spender) or health savings account (saver).

Spenders use the funds to cover medical expenses over the short-term. While fewer in number, savers use the accounts as part of a longer-term financial planning strategy, putting away funds for future expenses and even retirement; money can be used for non-medical expenses after 65 with no penalty, although users must pay regular income taxes on the amount withdrawn.

"People who use HSAs as financial planning tools put in the maximum," Arends said, which was $5,450 for family coverage and $2,700 for employee-only coverage in 2006. Limits for 2007 have not yet been set, but are expected to be raised by a couple of hundred dollars.

The funds can be used for items that may not be covered in full by health insurance, including glasses, psychotherapy, orthodontics and fertility treatments.

The HSA decision boils down to "What can I afford?" Arends said. "You don't want to forfeit a matching contribution in your 401(k)" by putting away too little in your retirement account.

-- Company incentives

Many companies contribute to employees' health savings accounts, and offer additional dollars for wellness initiatives, Kessler said. For example, "If you take this [wellness] quiz, we'll put money in your health-care savings account."

Trying to change behavior, or lifestyle--weight management, diet, exercise, quitting smoking--adds "the whole aspect of consumerism" to the mix, Arends said.

According to a recent Hewitt study of more than 18,000 U.S. employees, tools like health-risk questionnaires can make a difference. The study found three-fourths of the employees who completed questionnaires said they found them valuable, and more than 40 percent said they learned something new about their health.

What is new, Kessler said, is that "because people are so much more exposed to the costs of health care, staying well is so much more important."

"I think that one thing that folks are trying to do is, they're trying to make people understand the connection between health and wealth," he said. "And there is a connection."

Suzanne Cosgrove is a staff reporter at the Chicago Tribune.

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