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Health plans  

These new plans can save you money, but you need to know what you're doing.

Sorting out your medical insurance options

The current options in medical insurance aren't as complicated as the medical care and science they pay for, but it can seem that way as you try to decipher and unravel the intricacies of HSAs, HRAs and FSAs.

These health savings accounts, or HSAs; health reimbursement accounts, or HRAs, and flexible spending accounts, or FSAs, "are definitely not your father's health insurance policy," says Gary Thornton, a human resources management consultant in Scarborough, Maine.

"For a lot of people today," Thornton says, "their health plan is the card they carry in their wallet and hand in at the doctor's office, along with their $10 co-pay."

However, more and more companies are switching to health plans that will save them money. As a result, the employees and their families often have to take charge of their own health care and become as picky and price-conscious about health care as they are about anything else they buy.

The problem is, Thornton adds, "they've never had to deal with the question of being responsible for their own health care before."

According to Jordan Schreier, of the Butzel Long law firm in Ann Arbor, Mich., the idea behind "consumer-driven or consumer-directed health care is that it will make employees smart consumers of health care because they will be spending their own money, they will ask questions about what procedures might cost and if there are alternatives."

"It requires education," says MaryJo Pasek, an associate with TWIW Insurance Services in Bakersfield, Calif. People have to understand what they are getting -- and not getting -- for their money. "These programs are not for everybody," she says.

Many people should stay with the traditional health care plans that their companies offer and will continue to offer for the foreseeable future.

The new plans do offer a chance for companies and corporations to cut their share of health insurance costs and help educated employees reduce their own share of the cost, too, says Lillian Collier, another associate and benefits specialist at TWIW. But the employees offered these options "have to know what they are getting into and what they can reasonably expect to pay for health care. If they don't, they could wind up paying more money for less care."

For companies, "it's a cost-driven decision," says Schreier. "We've had double-digit increases in the cost of health care over the past five years or so, double digits each year."

One way companies save money is by buying health insurance with a higher deductible. It's like auto insurance. A policy with a $1,000 deductible -- one where you have to pay the first $1,000 of repairs -- is a lot cheaper than a zero-deductible policy where the insurance company has to pay everything. Some companies are passing those savings on to their employees by "sweetening the pot" to make consumer-directed health insurance more appealing.

It is important to remember that each company runs its own health plan system. Some put more company money into consumer-driven accounts than others. Some also add incentives to encourage employees to get involved in wellness programs. The IRS also sets limits on what you can put into and take out of some of these accounts, and those limits can change every year.

HSAs, health savings accounts
HSAs began in 2004. They are often funded entirely by the employee. According to a report by the Society for Human Resource Management, or SHRM in June 2006, about 6 percent of companies that offer HSAs match their employees' contributions; many other companies put in lesser amounts.

SHRM explains that an HSA helps "individuals save on a tax-free basis for future qualified medical and retiree health care costs." It has to be coupled with a high-deductible health insurance plan, one that doesn't kick in until medical costs have hit at least the $1,050 mark for individual coverage or $2,100 for someone with family coverage.

Next: "... plans come with an ATM-like debit card or a checkbook ..."
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