Watch Out for This Year’s Traps
Keep your eyes open during your employer’s health insurance open-enrollment period this year. Widespread and substantial changes in employee health insurance plans—some of them hidden in the small print and easy to miss—could boost your costs or curtail your coverage for 2015. Reason: Employers are trying to control ever-rising health insurance costs and cope with new rules under the Affordable Care Act, also known as Obamacare.
For instance, even though the “Cadillac tax” on employer-provided health plans that spend more than $10,200 per employee on coverage ($27,500 for families) doesn’t take effect until 2018, employers already are searching for ways to avoid paying the penalty. They are doing so by lowering the costs of plans to below the tax threshold. That may mean reducing benefits and/or passing along additional costs to employees. Many employers are phasing in these changes over the next three years rather than making massive downgrades to the quality of this insurance all at once in 2018.
Here’s what to look for when you choose health coverage for 2015…
SPOUSAL SURCHARGE AND PER-CHILD PRICING
Last year, the shipping company UPS took considerable flak when it announced that it would no longer offer health coverage to spouses of its nonunionized employees if those spouses could obtain health insurance through their own employers. Rules like that are becoming commonplace this year.
About 19% of employers plan to reduce or eliminate subsidies for spouses and dependents of employees for 2015 or have done so already, according to a survey by Towers Watson, while 37% intend to eliminate coverage for spouses who could obtain insurance through their own employers or impose surcharges on coverage for spouses.
Also, more employers are expected to follow Obamacare’s lead and charge extra for each child added to insurance coverage—a system known as “unit pricing”—rather than charge a single flat “family” rate regardless of the number of children covered. (Obamacare charges extra for each child added to individual health coverage up to three children.)
What to do: Spousal surcharges and unit pricing make it more important for two-income families to carefully sort through the options offered by both of their employers before either spouse makes benefits choices. An increasing percentage of two-income couples will discover that they’re better off obtaining coverage separately through each spouse’s employer than together as a family.
If one spouse’s employer charges extra per child, that might be a money saver for a small family…while big families are more likely to save if they insure their children through the employer that still charges a flat family rate.
About 32% of large employers intend to offer “consumer-directed health plans” (CDHPs), which feature high deductibles, as the only option for 2015, according to a survey of large employers by the nonprofit National Business Group on Health.
This presents two challenges for employees who face high-deductible plans for the first time. The first is the potential for steep out-of-pocket costs—at least $1,300 (at least $2,600 for families) out of pocket before insurance covers any part of medical expenses (with the exception of certain basic preventive services, which must be fully covered under Obamacare). Even after this steep deductible is reached, you still must pay hefty co-insurance—typically 10% to 35% of the cost of care—until you reach an out-of-pocket maximum that could be as much as $6,450 ($12,900 for families). Your employer might make a contribution to a health savings account (HSA) to help you with these out-of-pocket costs, but that contribution is unlikely to come close to covering your potential extra expenses.
The second challenge of high-deductible plans in 2015 is that the HSAs that often accompany employer-provided high-deductible plans can be an added source of confusion for employees already struggling to understand complicated health insurance policies.
What to do: Despite the drawbacks described above, high-deductible plans generally have significantly lower monthly premiums than other health insurance, so they often are a good fit for people who tend to have limited medical expenses. If your health-care needs are substantial, however, investigate whether you could obtain more substantial coverage at affordable prices elsewhere, such as through a spouse’s employer. It even might be worth paying a spousal surcharge. If you do end up in a high-deductible plan, it pays to take an active role in controlling your health expenses. If your doctor prescribes a drug, ask if there’s an effective generic option, and compare prices at several pharmacies. If your doctor prescribes a test, call several labs in your provider network to see which charges the lowest price.
Take the time to understand how HSAs work if one is included with your high-deductible plan. For more on HSAs, go to BottomLinePublications.com/HSA.
CARROTS AND STICKS
An increasing number of employers are expected to include “Value-Based Insurance Design” (V-BID) and/or “wellness” programs in health insurance coverage for 2015. These programs use carrots and sticks to encourage plan members to use health care in a cost-effective manner.
A wellness program might charge people who meet certain health-care goals and requirements lower premiums, copayments and/or deductibles than those who don’t. A V-BID program might reduce or eliminate out-of-pocket expenses for drugs and other treatments related to the care of a chronic condition such as diabetes, asthma or high blood pressure to encourage employees to manage potentially costly conditions responsibly and avoid hospitalization. On the other hand, a V-BID program might impose additional out-of-pocket expenses on someone who goes to the emergency room in what is clearly a nonemergency situation, such as a standard case of the flu. The penalty usually is relatively small, however-perhaps an additional co-pay of around $50.
What to do: Try to meet your employer’s health requirements. If you (or your spouse or dependent) have a potentially costly chronic health issue, ask whether any of the health insurance options available to you feature incentives for responsible management of this condition. Also, carefully read the section of a health insurance policy that explains your coverage for emergency room visits to see if there are financial penalties for using the emergency room in nonemergencies.
High-end “specialty” drugs such as the arthritis medication Humira and cancer drug Gleevec can cost four figures per month. If you (or your spouse or a dependent who is covered by your health insurance) takes such a drug regularly, do not sign up for any coverage until you read the section of the policy that covers pharmaceuticals. More and more plans are upping the amount that must be paid out of pocket for the costliest drugs and/or adding new requirements for the drugs to be covered at all.
What to do: Scan a plan’s formulary—its list of covered drugs—or contact the insurer to find out how much you will have to pay out of pocket to obtain any pricey drugs you require. If you do not currently take expensive prescription drugs, still check to see how well top-tier drugs are covered in general. Take particular note of whether you will be charged co-insurance or, instead, a co-payment with these drugs. A co-pay could be substantial, but at least it’s a fixed amount. Co-insurance is a percentage of the cost of the drug, which could be extremely expensive with specialty drugs.
Also, look for new rules related to the coverage of specialty drugs. Some insurers are adding new requirements that this priciest tier will be covered only if the insurer has provided preauthorization and/or the drugs are purchased through a designated seller, possibly a mail-order pharmacy.