As millions of American workers consider their health insurance options this fall -- the high season for open enrollment -- here's one truism to consider: The health plan presented in the rosiest light is most likely the one that will cost the employer the least.
What's the bottom line for workers? "It will be more costly this year not to take the right opportunity to change your coverage," says James Walsh, senior editor at Silver Lake Publishing, which publishes Hassle-Free Health Coverage.
For most of us, evaluating health insurance plans is neither easy nor pleasant. When workers delve beyond marketing buzzwords like "choice" and "simplicity," health plans are complicated, and they invariably either cost more or deliver less this year than they did last year. And in the 2000s, so-called consumer-driven health plans (CDHPs) add new trade-offs to the mix.
Consumer-Driven Health Plans
Even proponents of consumer-driven healthcare, which in theory gives employees incentives to allocate their medical dollars wisely, acknowledge that the variety and complexity of these plans is daunting.
"Now that the curtain has been pulled back on consumer healthcare, it's a pretty scary sight back there," says Bonnie Hathcock, senior vice president of human resources at healthcare provider Humana in Louisville.
Perhaps the vehicle for consumer-driven healthcare that's most familiar is the medical flexible spending account (FSA), which shelters employer and employee contributions for healthcare expenses from taxes. But millions of workers have shied away from FSAs due to the dreaded use-it-or-lose-it provision; funds must be set aside for healthcare expenses incurred in a given year and are forfeited if they aren't spent.
But some employers have created CDHPs using other vehicles and have garnered substantial worker interest and satisfaction. Humana's own employees, who have had the choice of CDHPs for five years, have become more comfortable with the concept, Hathcock says.
"Employees have started to take more risk now that they're more familiar with the plans," she says. For example, in exchange for lower premiums, Humana employees recently chose plans with deductibles averaging $1,100; just a few years ago, they opted for higher premiums and an average $200 deductible.
Humana has held its healthcare costs to single-digit percentage increases over the last three years -- a claim that can't be made of employer-provided coverage.
Up and Coming: Health Savings Accounts
A newer scheme for consumer-driven healthcare -- the Health Savings Account (HSA) -- came on the scene in 2004.
HSAs offer a route to relatively affordable premiums and tax advantages in exchange for high deductibles; the law requires that HSAs be established in conjunction with a policy carrying an annual deductible of $1,100 for individuals or $2,200 for families. Like FSAs, HSAs are a means of accumulating tax-advantaged money that can pay for healthcare expenses -- uncovered doctor visits, co-pays, premiums, etc. They are distinct from health insurance but must be used in conjunction with it. Unlike medical FSAs, HSA contributions can be carried over to the next year. They are fully portable to a new employer and can help fill any Medicare coverage gaps in retirement.
So far, some form of the HSA is offered by 13 percent of employers, according to the Kaiser Family Foundation's 2008 Employer Health Benefits Survey. But those employers may well be trendsetters. "Of employers offering HSAs, half are offering them as an option; the other half are mandating HSAs," says JoAnn Laing, author of The Small Business Guide to HSAs.
Critics of HSAs say that although they benefit employers by enticing employees to buy into high-deductible policies, they help only a narrow slice of employees: Those who are young, healthy and financially able to risk a spike in costs due to unanticipated medical expenses.
"HSAs are sugarcoated by employers," says Terry Brauer, CEO of Healthcare Management Consultants of Portland, Oregon. "It's going to cost employees much more money out of pocket. These are vehicles for cost-shifting to the consumer."
Indeed, many experts are skeptical of consumer-driven health plans in general. "It's hard to say people are benefiting" from these plans, says Walsh. "People are getting smarter about not getting screwed."
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