It Pays to Stay in Good Shape

That fat packet your employer hands you during open enrollment for health-care benefits is worth a close look. Health-care costs are up 5% this year, reports the Kaiser Family Foundation. That's better than last year, when costs rose 6%. But employers will still be looking for ways to keep expenses under control, which means you're likely to see increases in your premiums or co-payments.

On the other hand, more companies are offering employees so-called wellness discounts. Entering a program to stop smoking, adopting a weight-loss regimen or filling out a health-assessment questionnaire could earn you a financial incentive, such as a drawing for a cash prize, a gift card, or a break on your insurance premium of $100 or more. Such surveys help employers identify health risks, says Blain Bos, senior health and benefits consultant at Mercer. "There's a recognition that people are not always motivated to take care of themselves," says Bos.

Money that winds up in your pocket can help ease the pain of higher deductibles and other outlays. Bill Sharon, senior vice-president of Aon Consulting, says that typical co-payments of $25 per doctor visit jumped to $30 or $35 over the past year, and co-insurance -- under which you pay a percentage of a health-care expense instead of a flat fee -- doubled, from 10% to 20%. "In an environment in which health-care costs are going up, employers are making a lot of changes," says Sharon.

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The right fit. Instead of automatically re-upping the coverage you now have, calculate how much you actually spent on health care over the past year. Most employer-based health plans offer online tools that can help you track claims and other expenses. If your plan doesn't, or if your family situation has changed, use MetLife's free online tool at www.metlife.com/benefits.

With a handle on your expenses, you can calculate which plan best fits your spending pattern. For instance, if you use your health benefits a great deal or have family members who do, you might want coverage with a low cap on out-of-pocket outlays.

If you're healthy and don't use your plan much, you might be able to save money by purchasing a policy with a high deductible and pairing it with a health savings account. (Kaiser reports that 13% of employers offer such accounts, up from 10% last year and just 7% in 2006.) On average, if you have a family, a high-deductible plan combined with an HSA will require you to contribute about $2,300 to your total annual premium, Kaiser reports. A plan with a lower deductible, however, will call for an employee contribution of about $3,400.

But remember that premiums don't tell the whole story. To cope with higher costs, some companies are redesigning their health-care plans by switching from co-payments to co-insurance. That's particularly true when it comes to prescription drugs.

Requiring employees to pay a percentage of a drug's cost, instead of a flat fee, encourages them to use lower-cost generic drugs. Fewer brand-name drugs will go off patent in 2009 than in 2008, so employers are doing even more to hold down the cost of prescription medications, according to Pricewaterhouse-Coopers's Health Research Institute.

If both you and your spouse have access to employer-paid health insurance, you may be penalized if you sign up for your spouse's plan. If you have children, see which plan has the most cost-effective family coverage. And if either of you works for a small business that has elected to deal with rising health-care costs by putting its plan out to bid, you could have a new insurer and a change in coverage.

Money in your pocket. Take advantage of any health benefits for which you're eligible. For instance, your employer may give you the option of using pretax money to fund a flexible spending account that you can tap for out-of-pocket medical bills -- everything from insurance co-payments to contact lenses to braces for the kids.

For someone in the 28% tax bracket, contributing $2,000 per year to a flex account saves more than $800, assuming a 5% state income tax and 7.65% Social Security tax. (Run your own numbers with our Flex Spending Tool).

And more employers are offering HSAs, which can also be drawn on tax-free to pay medical expenses. Money you don't use rolls over from year to year.

To be eligible for an HSA in 2009, you have to have an insurance policy with a deductible of at least $1,150 for an individual or $2,300 for a family. If you qualify, you can contribute as much as $3,000 to an HSA ($5,950 for a family). About half of employers kick in money on behalf of their employees, says Sharon.