By Tom Murphy, AP Business Writer
Workers may need to do more homework when they evaluate their health coverage options this fall.
This year, more employers may include a new type of plan that can chop premium payments by nearly 20% and give consumers a tax break.
The tradeoff is higher deductibles, which have the potential to swamp customers with big bills. The plans, called consumer-directed health plans, vary from employer to employer and require careful comparison with other choices before making the switch.
These plans have been around for several years, but more employers are considering offering them as health costs rise and the recession fosters a new push to cut costs. Employees could see these higher deductible plans among their choices for the first time as open enrollment, the annual window when businesses allow employees to adjust their coverage, begins in a few weeks at many companies.
A consumer-directed health plan typically pairs insurance that carries a high annual deductible with an account fed either by an employer or by the employee through pre-tax contributions to help cover costs.The deductibles — which start around $1,200 a year and can approach $10,000 for family coverage — make the customer pay more money out-of-pocket for care before most coverage starts. The idea behind this insurance is to give clients an economic incentive to spend carefully, while providing protection from devastating medical bills. Some plans also provide annual physicals and other screenings at no cost to patients to encourage basic and preventive care that could stave off bigger bills down the line.
Some employers help cover the out-of-pocket cost by funding what's called a health reimbursement arrangement for employees to tap. The money belongs to the company and stays with it if an employee leaves.
A common alternative is to offer health savings accounts. Employees can deposit pre-tax dollars to cover medical expenses not covered by insurance. Some employers contribute to these HSAs. Unused money grows in the account, which belongs to the worker and is portable if he or she changes jobs.