Health care costs rising, but expenses can be controlled
— -- Let's see a show of hands. Who got a 9% raise this year?
Once you stop laughing, consider this: The average employee's health care costs, including premiums and out-of-pocket expenses, will increase 8.9% in 2009, according to Hewitt Associates. That's well above the rate of inflation and average salary increases.
For that reason, it's more important than ever to scrutinize your employer's health care options during open enrollment season. Don't assume the plan you used last year is still the best choice, because the terms may have changed, says Randall Abbott, senior health care consultant at Watson Wyatt, an employee benefits consulting firm. When comparing plan options, Abbott says, "I can't emphasize enough the need to really look under the hood."
Unfortunately, some health insurance plans have more parts than a car engine, so this is not a task you should tackle the day before your enrollment deadline. As you consider your options, here are tips on controlling costs:
•Understand the difference between co-insurance and co-payments. Many employees are accustomed to making co-payments of $5 to $25 for everything from prescription drugs to doctor's visits. But increasingly, employers are replacing co-payments with co-insurance in an effort to control costs, particularly for prescription drugs, Abbott says.
Under a typical co-insurance model, Abbott says, a plan may cover 90% of the cost for a generic drug, 75% for a brand-name drug that's on the plan's preferred list and only 50% of the cost of a non-preferred brand-name drug.
Co-insurance is designed to reduce the cost of prescription drugs by encouraging workers to use generic drugs or the lowest-cost brand-name drugs. Some plans have adopted a hybrid formula that charges a flat co-payment for generic drugs and co-insurance for brand-name drugs, Abbott says.
If you're accustomed to paying $10 or $15 every time you fill a prescription, a switch to co-insurance could raise your out-of-pocket costs, Abbott says. You can save money by using generic drugs whenever possible.
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