Check Your Health Coverage

I read a report in the news that said the average cost of employer-sponsored health insurance rose by 6.1% over the past year. What will this mean for me during open-enrollment season?

That figure was announced by the Kaiser Family Foundation and Health Research and Educational Trust, which conduct an annual survey of employer-sponsored health coverage. That 6.1% increase is the slowest rate of premium growth since 1999.

But it's still not a good-news story when you look at the cumulative increases: Since 2001, premiums for family coverage have increased by 78%, while wages have risen by only 19% and inflation has gone up by 17%. In fact, the average cost of employer-sponsored health insurance for a family ($12,106) is about the same as the annual earnings for a full-time worker who is paid the federal minimum wage ($12,168).

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Most employers, however, subsidize a big chunk of those costs -- paying 84% of the premiums for single coverage and 72% for family coverage on average, according to the Kaiser survey. The percentage of the employer subsidy has remained essentially the same since 1999, even though total costs have increased significantly during that time.

The premium is only one thing to look at during open enrollment season this fall. Employees also face rising out-of-pocket costs -- and sometimes changes aren't obvious.

Many employers, for example, are switching from co-payments to co-insurance for doctor's visits and prescription drugs. With co-payments, you pay a fixed amount -- say $10 per prescription. But with co-insurance, you pay a percentage of the cost -- say 20% of the price of the drug. Your share of the costs can rise significantly if your drug costs are high.

Also look at the policy's maximum coverage limits. Some employers are offering lower-deductible policies with low coverage limits of just a few hundred thousand dollars, which could leave you with tens of thousands of dollars in uncovered expenses if you have a major illness or accident. Look for policies with maximum coverage limits of $3 million or more.

If you're looking for ways to lower your premiums, it's much better to go with a policy that has a high deductible but also high coverage limits, which will minimize your potential out-of-pocket costs if you have catastrophic medical expenses. If you buy a policy with at least a $1,100 deductible for individuals or $2,200 for families in 2007 and 2008, you'll also qualify to set aside tax-deductible money in a health savings account, which you can use tax-free for medical expenses (see Health Savings Account Answers). More employers will offer HSAs this year and may even contribute money to employee accounts.

Also ask about special wellness discounts. Some employers are providing financial incentives -- such as cash bonuses, lower premiums or extra money added to your HSA -- to complete a health-risk appraisal, says Dave Guilmette, managing director of health and welfare consulting for Towers Perrin.

Because of potential changes to your benefits, it's essential to compare premiums as well as out-of-pocket costs for your typical medications and doctor's visits when selecting your insurance this open-enrollment period. And check out all the options for you, your spouse and your family. Some employers are adding surcharges for dependents who have other coverage options or are charging extra for large families. The plan that was least expensive in the past may no longer be your best deal.

Although employer coverage usually is still your best bet, you may do better on your own if you're healthy and your employer raises your premiums and cuts your coverage back significantly. You can compare rates for individual policies at eHealthInsuance.com or find a broker at the National Association of Health Underwriters. For more information about shopping for your own health insurance, see You Can Get Health Coverage.