Take Charge of Your Health Care

Employers and Uncle Sam want you to get involved in lowering your health costs. To save money and still get great care, you have to play by new rules.

Jason and Jean Jeffords of Bedford, N.H. pay about $240 a month for their health insurance, which they get through the small company that Jason works for. It's a pretty comprehensive package of benefits. Hospital stays? Check. Trips to the E.R.? Check.

There is just one (very big) twist: Their insurance won't pay for most of their medical care until they've met their $10,000 deductible for the year.

Fortunately, Jason's employer will offset that cost by depositing $5,800 this year into his health savings account, or HSA, a special tax-free savings vehicle available to people with certain high-deductible insurance plans. (The company also promises to pick up the other $4,200, if needed.)

The Jeffords, who say they spend about $2,000 a year on care so far, love the deal. If they stay relatively healthy and watch their expenses, the money in their HSA builds and builds. They can use it to cover deductibles, to pay for procedures their insurer won't or, if Jason leaves his company, to pay premiums to temporarily continue with his current plan.

Or they can save it for retirement, in which case an HSA is worth at least as much as a traditional IRA. Their balance is up to $13,000. "If I'd had this plan 20 years ago, I would have been in much better shape financially," says Jason, who is 41 years old.

Lisa Vertelney, 50, of Plymouth, Minn. also has a high-deductible plan with a health savings account. For her it has been a nightmare. Her family deductible is $3,900, and her employer puts only $700 a year into her HSA. Vertelney takes some expensive medications, so all of the money she manages to put into the HSA goes right back out again. Although she's spending money out of pocket, that hasn't freed her from the usual maddening insurance bureaucracy.

"I cannot tell you how many phone calls I have made about reimbursements from my insurer, billing errors and payments not posted toward my deductible in a timely matter," says Vertelney. What's more, she says, the financial burden of meeting the deductible has made it that much harder for her to save for retirement.

For better and for worse, in a few years your insurance plan might look a lot like those of Vertelney and the Jeffords. Employers are desperate to curtail the ever-mounting cost of health care, and they are turning to high-deductible insurance plans to push more of the burden of paying back onto your shoulders. Even if you are still in a traditional plan, you can expect elements of the high-deductible trend to creep in.

Plans are upping the share of costs employees must pay every time they see a doctor or go the hospital. They're loading on incentives for you to seek out the lowest-cost prescriptions. And many employers and insurers have become outright buttin-skies in an effort to keep you healthier. Apparently the size of your waistline isn't your own darn business anymore.

We're entering a new era of health care, in which you'll increasingly be expected to check up on prices and shop around before going under the knife or popping a pill.

You might not like this. (In fact, so many people hate it that Democrats have turned universal health care into a resonant campaign rallying cry.) But you must learn to manage it. How well you understand the new rules - and how well you play by them - could earn you or cost you thousands of dollars. More important, it could mean a lot to your health.

New Rule No. 1

Whatever kind of insurance you have, it's now your job to hold costs down.

Health-care spending is rising like a rocket - the government projects it will double in the next 10 years. Employers have been eating most of these new costs, which many economists believe is one reason businesses were relatively stingy with raises in recent years despite strong economic growth.

But employees are paying plenty out of their own pockets too. Insurers' "cost sharing" devices include deductibles as well as co-pays, those flat $25 or $50 fees that nibble away at you, and co-insurance, which is a percentage you must pay of the total cost for any service.

In 2008, according to the human-resources consultant Hewitt Associates, U.S. employees' average out-of-pocket spending is expected to rise 10%, to more than $1,700. (Ouch.)

It could get worse. With the economy slowing, companies are going to be eager to cut their costs. And with nervous workers clinging a little bit harder to their jobs, it will be even easier for firms to trim their benefits.

Take charge. First, if your company offers access to a flexible spending account, make sure you're using it. (Only 35% of eligible people do so.) Yes, dealing with the forms and the human-resources department can be a pain. But it's worth it. If you are in the 28% tax bracket, setting $2,000 aside in an FSA gets you a $560 federal income tax break.

Here's how it works: You make an estimate of what you'll spend on health care for the year, and that money goes into your account without getting taxed. Your employer decides how much you can contribute, with limits usually ranging from $3,000 to $5,000. The money can go to co-pays, your co-insurance costs, eyeglasses, dental care and even, depending on your employer, some over-the-counter drugs.

The tricky part: You must use the money by the end of the year (or at some companies, by March 15 of the following year) or you lose it. So be conservative when you estimate your expenses, especially the first year you try it.

Second, it makes more sense than ever to find out what your medical care will cost - which isn't to say this will be easy. "Compare the information on a box of breakfast cereal with what you know about the quality or price of a doctor or hospital," says Harvard business professor Regina Herzlinger, an advocate of market-driven health care. (Raisin bran wins hands down.)

But big insurers are getting better at sharing information with their customers, and many insurers have online tools that will show you average costs in your area for a procedure.

Finally, get as clear as you can about network rules. Some plans now offer lower co-pays if you use doctors they've judged to get better results relative to the costs. On the other hand, using a provider outside your network may sock you with an even larger bill than you expect.

Generally, when you go out of network, the insurer says it will pay a fixed percentage of the cost. But that cost may be based on what the insurer considers the "reasonable and customary" fee, not what the doctor or hospital actually charges you.

The New York attorney general has alleged that some insurers are using artificially low "reasonable and customary" levels to hold down reimbursement rates. So if you must head out of network, talk to both your doctor and your insurer about the bill you can expect.

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