4 ways to cut health-care costs: this is the season for selecting a health-insurance plan. Here's how to choose wisely—and save hundreds

Shape, Nov, 2004 by Fran Kritz

Have you received that hefty packet detailing your health benefits from the human-resources department yet? If not, you'll likely get one soon, as fall is the time many companies ask their employees to rethink their insurance coverage. And while 80 percent of us will simply check off what we had last year, benefits experts say that can be an expensive mistake. As insurance costs for companies rise, you can bet some of that burden will shift to employees. But by choosing the smartest insurance plan and taking advantage of other ways your employer or insurer can pick up more of the tab, you can still save hundreds of dollars next year.

The catch? You need to invest some time and effort: Read that benefits packet carefully, and visit your insurance company's Web site or call their customer-service representative. Here, four of the best ways to shave costs.

1. DO THE MATH

Choosing the health-insurance plan that will ultimately cost you the least while providing the care you want is no simple task. Most people look at just one number when deciding between insurance options: the monthly contribution their employer charges for coverage, says Richard Ostuw, a consultant with benefits firm Towers Perrin in New York City. But also knowing what you're likely to spend out-of-pocket in the coming year is crucial.

First off, ask your insurance company's customer-service department for a tally of fees you paid yourself in 2004, then break them down into co-payments for doctor's visits, co-pays for prescription drugs, and the like. Remember to factor in what the co-pay would be for an emergency-room visit or hospital stay in case of injury, especially if you participate in active sports.

Two more numbers to pay attention to are your deductible, or the amount you have to pay before your benefits kick in, and your co-insurance, or the percentage of physician's fees you're responsible for. Many managed-care plans don't have a deductible and pay 100 percent of physician's fees, but you're restricted on which doctors you can see, so you need to consider how much you're willing to compromise in your choice of physicians.

Next, evaluate in tandem these four factors: your annual contribution; out-of-pocket costs; deductible; and coinsurance, for each insurance plan your company offers to determine the one under which you'll likely pay the least. Your company may offer online calculators or worksheets to help you compare your costs, or you can use ours as a basic guide (see page 117). The online federal guide "Choosing and Using a Health Plan" at www.ahrq.gov/consumer/hlthpln1.htm#choices is an excellent general resource.

2. OPEN A FLEXIBLE SPENDING ACCOUNT

Flexible spending accounts (FSAs), offered by many companies, let you deduct pre-tax money--usually up to $5,000 a year--from your paycheck to pay medical costs not covered by health insurance. These include everything from cough syrup to LASIK vision correction to certain types of cosmetic surgery and fertility treatments.

It's up to each company to decide which expenditures are eligible, but WageWorks, a San Mateo, Calif., benefits consulting firm, offers a list of commonly allowed FSA expenses at www.wageworksmarket.com/eligible, as well as a calculator that can help you decide how much to put aside in an FSA account at www.wageworksmarket.com/calc/.

The one rule most people know about FSAs is that you lose whatever money you haven't spent by the end of the year, which is one reason only about 15 percent of those eligible sign up for an FSA account. But benefits experts estimate that no more than $20 is generally left over--funds that easily could be used up at the end of the year on a few boxes of over-the-counter allergy drugs.

HOW IT WORKS You could shell out up to $750 a year on nonreimbursed vision-care costs for things like eye exams, glasses, prescription sunglasses, contacts and contact-lens solution. But pull that money out of your FSA instead and you'll save yourself an average of 30 percent, or about $225, depending on your tax bracket, because you're using pre-tax income.

3. GET YOUR GOOD HABITS SUBSIDIZED

Hoping to keep you healthy (and thus less of a liability for them), most insurers offer discounts on such "good health behaviors" as gym memberships, weight-loss groups--even massage. The "Healthy Rewards" program from national insurer Cigna, for example, provides savings of up to 60 percent on chiropractic care, acupuncture, supplements, health and fitness magazine subscriptions, and smoking-cessation programs. Check your insurer's Web site (look for a "wellness" section) to find out about other discounts, or phone the customer-service rep (the number is usually in your sign-up packet or on the back of your insurance card).

HOW IT WORKS Aetna, among other insurers, has contracted with fitness provider GlobalFit to offer discounts on gym memberships, supplements, gear and home gym equipment, including $200 off a treadmill. Aetna members can purchase the discounted items at globalfit.com.