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It's open-enrollment season for my employer's health-insurance plans. What should I look for in a policy?
Don't assume that the coverage you have had is still the best deal. Instead, compare total out-of-pocket costs for all of the plans offered by your employer and your spouse's employer.
Average premiums for employer-sponsored coverage increased by 5% this year, according to the Kaiser Family Foundation. The average family plan costs $12,680, with employees picking up $3,354 of the bill. Single coverage costs $4,704, on average, with employees paying $731 per year.
But the premiums can vary depending on the size of the company. Workers in small firms (3 to 199 workers) tend to contribute less for single coverage than workers in large firms ($624 compared with $769), but they often contribute significantly more for family coverage than workers in large firms ($4,101 compared with $2,982). If you're married, have children and both you and your spouse get insurance through your employers, compare the premiums on both plans to see which offers the best subsidy for family coverage.
Premiums are just one factor to consider. Companies have been increasing costs in less-obvious ways. The average co-payment is now $19 for visits to primary-care doctors and $26 for specialty physicians. And employees with high-deductible health-insurance policies are more likely to have co-insurance than co-payments, meaning that they pay a percentage of the total cost of a doctor's visit. On average, an employee with co-insurance will pay 17% of the bill.
As for prescription drugs, the typical plan charges a $10 co-payment for generics, $26 for preferred drugs, $46 for nonpreferred drugs and $75 for specialty drugs. Some plans have co-insurance rather than co-payments for specialty drugs, requiring employees to pay 28% of the cost. This change can make a huge difference if you take expensive specialty drugs with no lower-cost alternative-28% of the total cost can add up to much more than $75.
However, many plans provide coverage for preventive care and prescription drugs without requiring the insured to pay a deductible first. And some offer bonuses for completing a health-risk assessment or participating in wellness programs.
In addition to comparing out-of-pocket costs, look at coverage maximums and exclusions or caps on out-of-pocket costs. A policy with a low coverage maximum-$1 million or less-could leave you with thousands of dollars of uncovered expenses if you have a major illness or emergency.
One way to lower the premiums is to choose a high-deductible health-insurance policy and pair it with a health savings account, an option that 13% of employers offer. Your employer may even contribute to the savings account. If your policy has at least a $1,100 deductible for individuals or $2,200 for families in 2008, you'll qualify for a health savings account. You can use money from an HSA tax-free in any year for medical expenses and take it with you if you leave your job. For more information, see Health Savings Account Answers.
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