Open Enrollment: Surprising Co-Pay Tricks to Save Money

Oct. 10, 2012 -- Open enrollment for most employee health plans began October 1, so as you plow through all that annoying paperwork, here's a pop quiz.

Which is cheaper?

A) A health plan where you pay 10 percent of your doctor visits?

B) A health plan where you pay 30 percent of your doctor visits?

If you answered "A," believe it or not, you're probably wrong. But don't feel bad. Millions of Americans get this answer wrong every year, some experts say. There's a mentality in this country that the best health plan is one where you pay little or nothing to go to the doctor. But here's the trap: to get a health plan like that, you usually have to pay a huge premium up front. You don't feel that cost because it's taken out of your paycheck each month. You're paying a bundle in premiums for the privilege of low-cost doctor visits, but you may never need those doctor visits. It's like paying for a zillion cell phone minutes even though you don't talk on the phone that much.

Instead, if you are in good health, you could try more of a pay-as-you-go arrangement. Here's how you assess your options:

1) Look up how much your typical doctor's appointments cost.

2) Figure out how many times per year you usually go.

3) Then calculate how many times you would have to go to the doctor for the high premium plan to pay off.

Let's use my own past family health plan choices as a sample. Here are the costs:

•10% plan: $8,580 annual premium

•30% plan: $1,872 annual premium

DIFFERENCE: $6,708

In other words, if you choose the 30 percent plan, yes, your doctor visits are going to cost you more out of pocket, BUT you've got the $6,708 you aren't paying up front to work with! Let's say a typical doctor's appointment costs $200. Your 30 percent portion would be $60. That means you and your family could go to the doctor approximately 111 times and still have a few bucks left over before paying what you would have with the 10 percent plan out of the gate! (To really compare apples to apples, you'd have to factor in the 10 percent you pay for office visits on the pricey plan, but you get the idea.)

"Enrolling in a health plan really comes down to evaluating a trade-off," said Mike Thompson, principal with accounting firm PwC's human resource service practice. That trade-off is often between a higher premium, which comes out of your paycheck through employer-sponsored plans, or a co-pay, which is paid per procedure or visit.

The naysayers will write in and say it's reckless for me to suggest this strategy. My answer to them is that health plans come with a limit on out-of-pocket costs, so if you ARE struck with some dread disease, the burden on you has a cap. Look up that cap and know that number as you consider your choices. If somebody in your family has a chronic illness... or you know you need surgery this year... or you're going to have a baby, then maybe choosing a lower premium/higher co-pay plan is not for you. But if you are generally in good health, you should at least do the math, and then make your decision.

Thompson said that it is possible a family would meet the out-of-pocket maximum well before the 111 visits. Also, co-payments can be higher for specialists, such as a $25 co-pay for a primary care physician and, say, $40 for nephrologists.

Other plans, such as some HMOs, may require a $300 a month premium that may allow you to see an in-network doctor only.

There are also a number of unexpected things that can happen when one becomes sick. That includes co-insurance payments for diagnostic tests and lab work.

"Most of us don't expect to go to the hospital next year, but any of us could," he said.

Nancy Metcalf, senior program editor with Consumer Reports, said there is no standardization in health plans which makes it difficult to give general advice.

"My favorite quote from a health insurance expert is if you've seen one health plan, you've seen one health plan," she said.

Both Metcalf and Thompson see benefits in at least getting tax savings with a tax-deductible health-savings account --only if your employer offers this type of high deductible health plan. These HSAs allow one to transfer tax-deductible money of varying amounts from year to year to be used for health care. These differ from flexible spending accounts, or FSAs, in which the monetary balance expires at the end of each year if you don't use it.

Choosing health care can be difficult for even the healthiest of individuals. But this year, a provision in the new health care law will require insurers to offer a comparison of features.

Metcalf describes the information as a "nutrition facts label" with a summary of benefits and coverage that is "fantastic."

"If you don't get it, ask for it, because it's a real valuable thing," she said.