Examine your health plan
A year ago, I made a $343 mistake. I wrongly assumed that remaining in the health plan I had last year would keep my health benefits largely the same this year.
“In the last couple of years, there’s been a lot of internal fine-tuning of health benefits,” said Ed Kaplan, who heads the health-benefits practice at New York-based consulting firm Segal & Co. “The consumer really ought to take the time to check up on things. There is a lot of activity behind the scenes.”
Traditionally, the main thing employees needed to watch for was whether the doctors they used would still be in their plan. Physicians and medical groups move in and out of plans fairly regularly. The difference is important because most plans reimburse less for “out-of-network” care than for “in-network” care.
And the recent corporate “fine-tuning” has made this doctor check more pivotal than ever. An increasing number of plans are cutting reimbursement rates for out-of-network care and imposing a separate and much higher deductible -- the amount of care you must pay for on your own each year before the insurance kicks in -- for out-of-network expenses. (That’s where I made my mistake.)
In some plans, how much of your doctor fees are reimbursed depends on whether the physician is a general practitioner or a specialist, regardless of whether the provider is in or out of the network, Kaplan said.
Many companies are changing their pharmacy plans too, often to encourage the use of generic drugs. Before, it wasn’t unusual for a plan to pay a set percentage of a medication’s cost or to require a fixed co-payment for all drugs. Now, there’s a good chance your plan uses a less generous reimbursement formula for brand-name drugs than for generics.
In other words, there’s a lot to watch for. As open-enrollment season begins -- when many employers let you change health plans -- how do you make the best choices?
Gather records
Unless you had a highly unusual year, it’s likely that your family’s health expenses next year will resemble last year’s. So pull out a year’s worth of medical records to refresh your memory about how many medical visits each covered family member had, both in and out of network, as well as how much you paid in co-payments, deductibles and premiums.
Also take a look at how your family used pharmacy services, vision and dental care this year. And calculate your total out-of-pocket costs.
While you’re at it, it’s not a bad idea to consider whether it makes sense to schedule needed medical treatments before the end of the year, to take advantage of the fact that you’ve probably met your 2007 deductible by now. Just as many people try to lower their taxes by bunching tax-favored expenses into one year to get over thresholds set up by the government, families can bunch their medical bills to make better use of their health plan deductibles.
Of course, don’t schedule treatment you weren’t already planning to get. But if you’re trying to decide whether to get that dermatologist’s exam in January or December, opting for December might save a few bucks.
Gaze into the future
Do you foresee anything that could change your medical usage? For instance, do you have teenagers in need of orthodontia? Have you reached an age when it’s advisable to get more detailed and costly health tests? Do you have bad eyes, bad knees or some other ailment that’s likely to require surgery? If so, make a note.
Compare plans and choose
If your employer offers several health plans, estimate what your total cost of care, including premiums, co-payments and deductibles, would be under each option given your expected use of healthcare.
If co-payments and deductibles that you’re counting on are contingent on seeing in-network doctors, be realistic about your willingness to do so and factor in any out-of-network costs that you anticipate.
If you intend to stick with your previous year’s health plan, review it to ensure that your doctors and out-of-pocket costs will remain relatively stable.
You don’t need to choose the least costly plan. You may instead want the best care at the most reasonable price. Guesstimating your out-of-pocket costs under each scenario will help with the cost-benefit analysis and help determine whether you should participate in tax-saver accounts (more on them later).
Coordinate benefits
Two-income families must walk through the benefits that each employer offers and figure out whether it makes sense to cover the whole family under one plan or cover each employee under his or her own plan. Because coverages are changing significantly every year, the decision you made last year may not be the best one this year, said Kirby Bosley, a healthcare consultant at Watson Wyatt Worldwide in Universal City. Employers increasingly are subsidizing more of the cost of worker-only coverage -- or coverage of the employee plus children -- than of coverage that includes a spouse. So it may be cheaper to cover one spouse and the children under one plan and the other spouse under another plan.
Do the math on the extras
If your employer offers vision or dental care, do some calculations before signing up, Kaplan said. The reason: Many of these plans have relatively low caps on benefits. For example, a plan may pay a maximum of $1,000 or $2,000 annually but charge substantial premiums.
In some cases, Kaplan said, you’re better off forgoing the coverage and simply putting the premiums in the bank. Keep building that fund year after year, he added, to help defray the cost of teeth cleanings, eye exams, root canals and whatever more costly care may come later.
Save on your taxes
Many large employers let employees set aside a portion of each paycheck, before taxes, to pay medical expenses. These tax-saver accounts can be particularly beneficial if you’re planning substantial expenditures that aren’t covered by insurance, such as orthodontia or laser eye surgery. Your money pays the bills, but because it comes out of your pay before taxes are taken out, you avoid income and payroll levies on that amount. The only catch: Any money that’s left in the account after a set period, usually a year, is forfeited. So fund the accounts with a sum you’re certain to spend in the relevant time period.
Pick up some money
An increasing number of employers are offering incentives for workers to do certain things, such as attend stop-smoking or weight-loss classes or even just to fill out health-risk assessments, Bosley said. The incentives might not be earth-shattering -- maybe a $50 rebate or slightly reduced insurance premiums. But if you could benefit from one of the classes, getting some cash may be a good way to talk yourself into going. And the assessments usually take only a few minutes -- and could help make you healthier -- so it would be foolish to pass them up.
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Kathy M. Kristof welcomes your comments but regrets that she cannot respond to every question. Write to Personal Finance, Business Section, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012, or e-mail kathy.kristof@latimes.com. For past Personal Finance columns, visit latimes.com/kristof.
