Health Costs

By Jilian Mincer

Track Benefits Changes

The medical benefits your company is offering for 2008 may look like this year's coverage, but chances are they're changing. Businesses are trying to address rising health-care costs by shifting more expenses to workers and also by trying to keep people healthier.

As the annual enrollment season gets under way, it is important for consumers to read their benefits materials closely and to consider their health, income and potential out-of-pocket expenses for next year.

"The biggest mistake people make is not to know the fine points" of their plan, says Alwyn Cassil, a spokeswoman for the Center for Studying Health System Change in Washington.

Focus on Deductibles

People may see increases in premiums and in deductibles, or the expenses they must pay out of pocket before coverage kicks in, says Tom Billet, a senior consultant for Watson Wyatt Worldwide.

More employers also are rolling out high-deductible health plans, which are typically combined with  a tax-advantaged health savings account, or HAS. Utilization of these plans remains low but is expected to increase as they become the only option offered by some companies.

Mr. Billet says a high-deductible plan with a low premium could be a good choice for someone who is young and healthy and rarely uses medical services. Such coverage may also appeal to a high earner who can afford the out-of – pocket medical expenses and wants to save for future health-care costs.

In 2007, a family could save more than $5,000 in pretax dollars in an HAS. That money grows free of federal tax as long as it is eventually used for health-care expenses.

The majority of Americans in employer-provided plans use preferred provider organizations, which offer financial incentives to deal with a network of medical providers. In 2008, more employees in PPOs will be expected to pay a percentage of their medical expenses rather than a fixed co-pay of about $20 or $30 for an in-network medical visit, says Sara Taylor, annual enrollment leader at Hewitt Associates.

That new approach "may be more expensive if you're a high utilizer of health care," she says. "It's also an unpredictable cost."

Most companies are still offering workers more than one health-care plan, but the choices are decreasing to save administrative costs. Many firms are adding online tools to help workers determine which plan to choose.

Paying for Prevention

Employers also are focusing greater attention on preventive care and identifying conditions that could lead to more serious illnesses. Many now offer 100% coverage for vaccinations and screenings for conditions such as breast, colon and cervical cancer.

More businesses also are requiring or encouraging workers to complete a health-rish assessment to help identify health problems before they become serious. Some plans are offering discounts to healthy workers who don’t smoke and aren't overweight.

Another big change in 2008 is greater scrutiny of health coverage for spouses and dependents. Some companies are going to implement higher premiums for spousal coverage if that person is eligible for other health-care coverage, according to Watson Wyatt.

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