Monday, October 18, 2010

Coping with Obamacare's price increases

If you have received your open 2011 enrollment package for your company’s health care benefits, like me you may have experienced some sticker shock this year. With the passage of the health care reform law, many Americans are finding that their health insurance premiums are going up and that their benefits are going down.

To make the most of your health insurance dollars, take a little extra time this year and examine all the alternatives that your company offers. One of the first things to consider is whether you and your family use your health insurance a lot or a little. If you rarely go to the doctor or get prescriptions filled, then you probably don’t need the most expensive plan with all the bells and whistles. For people who rarely use their insurance, a high deductible plan might save money.

Major medical plans typically have a deductible and many do not include copayments. This means that you will be responsible for paying your health insurance costs until you meet the deductible. For example, if your plan includes a $1,000 deductible, you will have to pay the first $1,000 of medical expenses for the year. After the deductible, these plans usually pay a set percentage, usually 80-90% of the medical bill. This leaves the employee to pay the remaining 10-20%. This is called coinsurance.

Aside from lower premiums, an added advantage to these plans is that they reward price shopping. Since the employee is always paying a percentage of the bill, rather than a set fee, it is in their interest to find a good deal. For example, an employee paying 10% coinsurance would save $5 per office visit by choosing a doctor who charges $100 rather than one who charges $150. (The employee’s share would be $10 of the $100 bill or $15 of the $150 bill.) Again, coinsurance only is a factor after you have met your deductible.

On the other hand, if you or someone in your family has several maintenance prescriptions or has to go to the doctor frequently, then you might want to pay a higher premium for a plan with better benefits. For example, an HMO plan might have a copayment for doctor visits that is $10 regardless of how much the doctor charges. As an added bonus, HMO plans do not generally include deductibles.

One way of determining which plan is best for your family is to look at your medical history for the past year. If this was a typical year, medically speaking, you can estimate how much your costs would have been with each plan and choose the one that is most cost effective.

Consider also whether you expect to have any surgeries or other health problems in the coming year. If you are expecting to use your health insurance a lot in the coming year, obviously you should choose the plan with better benefits. An alternative would be to schedule your surgery before the end of the current year.

Especially if you are considering a high deductible plan, consider a Flexible Spending Account (FSA) if your company offers one. FSAs allow an employee to put money into an account for health spending. This money is deducted from your paycheck before taxes, so it lowers your tax liability for the year while it increases your health care spending power. As your health care bills come due, the money is deducted from your account to pay them.

There are downsides to FSAs. One is that that the money must be used for health care items. This can include doctor visits, prescriptions, glasses, contacts, hearing aids, etc. Another major problem is that the money in an FSA must be used before the end of the year. Any money left in the FSA at year’s end is lost since it cannot be rolled over to the next year. Therefore you should carefully plan how much money to deposit into your FSA to avoid a last minute rush to spend or lose the funds in your account.

Additionally, if both spouses are eligible for health insurance through their employer, consider both plans. First, it is probably not cost effective to buy duplicate coverage through both employers. Consider which plan gives you the best “bang for the buck,” the best coverage for the dollars that you spend. You may also want to look at having each spouse get an individual plan through their own employer. Take all the possibilities into account and find what works best for you.

In this economic climate, you should also consider which spouse’s job is most stable. If you choose to purchase health insurance through only one employer and that spouse loses their job, you would have to rely on COBRA until the end of the year. You can only make changes to a group health plan during open enrollment unless certain events, such as having a child or getting married, occur. COBRA is currently subsidized by the government but is still more expensive than most health plans.

One additional consideration is that you might want to forgo your employer’s group health plan altogether. For many employees, the employer pays a percentage of their premiums and this makes the group plan much cheaper than an individual plan. To find out if an individual plan is most cost effective for you, contact an insurance agent and submit an application. Remember to apply for the individual plan well before you need to make a decision on your group health plan. This way you can determine the actual premium based on your medical history and make an informed decision. Make sure to let the agent know that you do not want the insurance effective until your group plan lapses. If the individual health plan turns out to be more expensive, you can cancel this coverage before it takes effect and elect for the group plan as long as you don’t miss the open enrollment deadline.

Finally, if you are unhappy with the changes that Obamacare has brought to your health insurance, remember to vote on November 2. The upcoming election will determine the future of health care in the United States. Find out how your representatives voted on Obamacare and find out which candidates will vote to repeal the current law and replace it with a free market solution.

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