Picking a consumer-driven health care plan
you plow through your company's benefits material this open season, you may
encounter a new health insurance offering: consumer-driven coverage.
These plans generally combine a medical reimbursement account
with high-deductible insurance. Here are some issues to consider before making
How is the reimbursement account funded
and what are its use guidelines?
There are differences, but both medical savings accounts and health
reimbursement arrangements are tax-free for the employee if the employer puts
in the money. The accounts can't be cashed out, but they can be rolled over.
After a few years of rolling over, you can accumulate quite a bit of cash to
pay for health care. If you put in the money yourself, then the Internal Revenue
Service designates these as flexible
spending accounts, which demand you spend all your account or lose it at
the end of your benefit year. Some employers ignore the tax issue altogether
and just hand over the money without many strings. These accounts are not tax-advantaged;
you'll pay taxes on the money. But if you don't spend it, you get to pocket
it at the end of the year.
What are the limits on health care provider
choices and charges?
In the most minimal of plans, the employer gives you the money and says,
"Go buy health care." But there's more to consider. First costs: Doctors
have rate sheets that are mostly wishful thinking since insurers and the government
spell out what they are willing to pay. A self-pay customer doesn't have a maximum-payment
schedule and can be hit with a significantly higher bill. If your consumer-driven
insurer does the negotiating, the costs may be more reasonable, but you'll probably
have limits on which health care providers you can use. If you have to do the
negotiating, you'll have more freedom to choose, but you'll have to work out
the best deal, and haggling when you're sick can be daunting.
Does the insurer offer you research tools?
A few insurers make available a database of area doctors' credentials,
the number of key procedures performed, what the nongovernmental reimbursement
rate is (what other insurers pay him for routine care) and some other information
that's valuable in helping you make a choice or negotiate a payment rate.
Does the plan offer some sort of wellness
Prescription discounts, free physicals, free or discounted health club
memberships and the like can offset what you have to pay out of pocket. Also,
are there health care counselors available who can help you negotiate care?
These experts not only save money, they also can steer you toward better care.
How are pre-existing conditions handled?
Some insurers may have limits. Make sure the guidelines are spelled
Is there an absolute maximum out-of-pocket
that you'll have to spend?
If your open-season materials don't go into detail here, ask for specifics.
You want to know how much you'll have to pay in a worst-case scenario and how
that amount is figured.
What kind of a health care consumer are
If you have a choice of plans, consider these basics carefully. Do you
use health care a lot? Are you willing to talk frankly to health care providers
about costs? If you had to meet the deductible, do you have the cash reserve
to do so, in one year or many years? How you answers these questions will go
a long way in helping you decide if consumer-driven coverage is right for you.
Jennie L. Phipps is a contributing editor
based in Michigan.
-- Posted: Sept. 23, 2003