- By Jack Fehr
For workers in their 50s and 60s, few benefits decisions are more important than choosing the right employer-sponsored health coverage. And as you’re making your health plan selections for 2017, you’ll likely find your out-of-pocket costs are rising. The average deductible for single coverage is $1,478, up from $1,318 a year ago, according to a Kaiser Family Foundation/Health Research & Educational Trust survey.
So the more you can do to make smart choices and keep your costs down, the better. Here are four steps experts recommend to keep your health bills down and the quality of your health care up when picking your 2017 health plan:
1. Estimate your health care needs in the year ahead as accurately as possible. Before choosing a plan, you’ll want to zero in on what your prescriptions and normal medical issues run and account for the fact that you’ll be one year older in 2017. Typically, we need more health care as we age. The Centers for Disease Control and Prevention reports that three in four people 65+ have multiple chronic conditions, but only one in four Americans overall do.
We often believe we’ll be as healthy tomorrow as today, but later regret our health care choices when we can’t pay out-of-pocket costs.
— Matthew Owenby, Aflac
How much will health care cost you in 2017? Start with what you know.
“I recommend people calculate what they spent last year, including co-payments and co-insurance,” says Julie Stich, Research Director for the International Foundation of Employee Benefit Plans. Also, she says, estimate how much any planned elective and non-emergency procedures will run, after insurance.
AARP’s Health Care Costs Calculator is another way to personalize potential medical expenses for 2017. It estimates lifetime health care costs, starting at your current age and lets you see how lifestyle changes can reduce your medical bills.
2. Spend the time you need to choose the right health plan. “Employees have to take more time choosing than they did when deductibles were lower,” says Matthew Owenby, Aflac’s chief human resources officer. “We often believe we’ll be as healthy tomorrow as today, but later regret our health care choices when we can’t pay out-of-pocket costs.”
The 2016 Aflac Open Enrollment Survey shows that 58 percent of boomers spent less than 30 minutes exploring their choices during their last open enrollment. Worse, a whopping 93 percent choose the same benefits year after year with little research.
Big mistake. “People understandably want to continue their past coverage because it’s comfortable and what they’re used to,” says Karen Frost, Aon Hewitt’s senior vice president of health strategy and solutions. “As a result, they sometimes don’t get the best deal.”
But the plan you’ve been using may have different doctors in network in 2017 or different types of coverage.
Says Gene Lanzoni, assistant vice president, thought leadership for Guardian Life’s group & worksite marketing: “We find some employees who aren’t prepared to pay high out-of-pocket costs forego needed medical care. “One reason is that employees understand their health plans less than they believe they do.”
Granted, wading through your employer’s materials is no fun. There may be dozens of pages of documents describing a variety of plans, coverages and related health savings accounts.
But with the right tools and a wise investment of time, you can find the right deal, says Frost. Often, employers provide online calculators to let employees whittle down options. (If you work for a small employer that doesn’t offer them, your health plan provider probably will.)
“Online tools can quickly tell you if your doctor is in-network and offer out-of-pocket cost comparisons in as little as a half hour. If you have new options, maybe you spend an hour,” notes Frost.
Even if you were happy with your plan in 2016, use these tools to compare your 2017 choices. You may find a better, less-expensive alternative.
3. Scrutinize the plans’ out-of-pocket costs beyond the annual premium. Yes, it’s important to compare premiums among the various plans your employer offers. Mercer found premiums for high deductible health plans (HDHPs) offered by large employers averaged $84 per month for single coverage and $321 for family coverage. In contrast, premiums for Preferred Provider Organizations (PPOs) were $132 and $467 respectively.
But your premium is often the least of your out-of-pocket tab. Deductibles, co-insurance and co-payments can dwarf its cost.
Keep in mind that lower premiums often come with much higher deductibles.
In 2017, HDHPs must include an annual deductible for single coverage of at least $1,300, but no more than $3,400. Family-coverage deductibles for these plans will range from $2,600 to $6,750. Add in annual copayments and coinsurance, and out-of-pocket limits can hit $6,550 for single coverage and $13,100 for family coverage. PPO deductibles are two to three times smaller, but total out of pocket costs are often the same.
To decide whether to go with a high-deductible plan or a PPO, compare premiums, deductibles, co-insurance and co-payments.
4. Look into whether a Health Savings Account (HSA), a Health Reimbursement Account (HRA) or a Flexible Savings Account (FSA) could save you money. Employers and employees can contribute to tax-deductible HSAs for workers with high-deductible health plans up to $6,750 annually for family coverage or $3,400 for single coverage (an extra $1,000 if you’re 55 or older). Contributions, investment gains on your balance and withdrawals are tax-free. You own the account, so you can carry balances into future years. If you expect large health care costs, an HSA might be a good option.
An HRA is funded exclusively by employers, for workers with high-deductible health plans. Enrolling in an HRA can offset your health insurance premium and pay for health costs incurred before you meet your deductible. HRA reimbursements can often be used to help pay deductibles, co-payments, co-insurance, prescriptions, vision expenses, dental bills and other out-of-pocket costs. It’s a good option if you don’t expect huge out-of-pocket costs.
If your employer offers an FSA, you can fund it with up to $2,600 in 2017. You can sometimes carry up to $500 into the next year. There’s no tax deduction with an FSA, but contributions are pretax and distributions aren’t taxed. Unlike an HSA, you don’t have to have a high-deductible plan to use an FSA.