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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 company then adds $750 to each HRA. But the employees still have a $250 deductible to pay before they can access their HRAs. They get access to the $750 after they pay the $250. The employer is self-insuring that $750 since some of its employees will not even meet the $250 deductible."

FSAs, flexible spending accounts
An FSA, which some companies call an FSP, or flexible spending plan, is similar to an HRA except that employees can -- and usually do -- put money into it. In some cases companies do, too, but each company sets its own policies.

In a typical company, employees estimate how much their out-of-pocket medical expenses will be for the year, and that is deducted from their pay before taxes and put into the plan. They then use the money -- often through a debit card -- to make the medical and medical-related payments that their health insurance does not cover.

The biggest problem with an FSA is that if an employee does not spend everything in the account by the end of the year, the company gets the money ... even though it's often the employee's own money. That, by the way, is an IRS rule, not a company rule.

The biggest advantage is that the money in the account is pretax, reducing your taxable income.

As with HRAs, when the end of the year draws near, people with money in their FSAs start looking for things to spend it on, such as an extra pair of glasses and so on.

The problem with this, Schreier says, is that, "They are using their money because they have to, not because they need to. The individual would have been better off predicting a lower amount of money to go into the account."

Which plan is right for you?
If your company offers traditional health insurance, you don't have any decisions to make ... yet. But as the price of health insurance increases, more and more companies are switching to nontraditional programs and, in many cases, making their employees make decisions that they've never had to make before.

"Companies do want to keep their employees," Pasek says, "and they do want them to be happy." But these new plans are just that, new ... and confusing. "It's a lot like where we all were when the IRA and the 401(k) were first introduced. Employees didn't really understand them, and it was human resources' job to explain them. And that's the job today, too."

That's why Pasek says that if your company is offering an alternative plan, you need to meet with a benefits specialist in human resources and figure out which is the best one for you, personally. To do that you'll need to know what your health expenses have been in the past and what you can reasonably expect them to be for the next year. If your company will let you bring your spouse to the meeting, do so.

Create a news alert for "health insurance options"
-- Posted: Nov. 27, 2006
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