By Amanda Gengler
July 27, 2013

Richard Ollis is the boss of the future. Eight years ago the president of a 30-person benefits and insurance company in Springfield, Mo., decided to tackle his workers’ deteriorating health. His firm’s insurance premiums were increasing by double digits every year; sick days were on the rise. He started with a newsletter and lunch lectures on healthy habits. Next up: a fitness center and fresh fruit in place of the vending machines. He offered the staff free on-site checkups that measured blood pressure, cholesterol, and more, but only 30% got one that first year. So Ollis raised the stakes.

Now employees who do the health assessment and adopt an exercise regimen, among other things, qualify for a health plan with a $250 deductible; the company pays the full premium. Workers who sit out face a $5,000 deductible and owe 25% of the premium. Every employee has hit the gym, started walking, taken up yoga, or the like. “I don’t think it is unreasonable,” says Ollis, “to say if I am going to pay for your health care, I have some expectations for you to be reasonably working on your health.”

Working out to save money is only the beginning. Soon you could be sweating over a lot more aspects of your health coverage. For years, in the face of rising insurance costs, employers have been shifting more of the bill to you by raising your premiums, deductibles, and co-pays. Now businesses are taking a new tack, going after high health care costs at the source and enlisting you in the fight — whether you want to be in it or not.

From the day you pick a policy to every time you make a doctor’s appointment, your employer will push you to stay healthy, use fewer medical services, and patronize those providers who can deliver care more efficiently. “I have been doing this for 26 years and can’t remember another time when so many complex changes were happening,” says Edward Kaplan, who oversees the health benefits department for Segal Consulting.

Health reform is giving companies another impetus to pare back. The most generous insurance plans, the thinking goes, drive up health care spending because so much care is covered. So, starting in 2018, those high-end plans will face a steep tax (the so-called Cadillac tax), and firms are acting now to avoid the levy in five years.

Some of those shifts you’re already seeing; others are years away. All require more from you: more decisions, more tradeoffs, and potentially more costs to bear. You need to know how to handle what’s coming your way.

You may not be able to afford your own doctor

Today you can visit an in- or out-of-network doctor and hospital. You’ll spend more to venture to an outsider, yet why bother? In-network choices often include the bulk of providers in town. Soon that freedom may come at a cost.

Even within the same city or the same insurance network, prices vary widely from doctor to doctor, and the most expensive care isn’t always deemed best. “Consumers associate higher cost with higher quality, and the research shows that isn’t always true,” says Peter Hussey, a senior policy researcher at the research firm Rand.

To get you to skip certain top-shelf providers, and the ones who are trigger-happy when it comes to prescribing tests, insurers are naming favorites, a list that might include a third to half of your current in-network doctors. These doctors all meet the insurer’s care criteria — Aetna, for example, rates doctors on how often they provide recommended care and screenings, such as diabetes management, and hospitals on their mistakes and readmission rates. And they do it for less than many of their peers.

Agree to stick to the narrower list, and you can shave 10% to 20% off your premium. You’ll probably still be able to see an outsider, but you might have to pay 40% or more of the bill instead of 20%; with some policies, you’ll pay 100%. A third of large-company plans may have this option by 2014, says benefits consultant Towers Watson, up from just over one in 10 now. In a variation on this, a few big firms, including Wal-Mart and PepsiCo, are picking up the tab for employees who agree to travel to major medical centers like the Cleveland Clinic, where the firms have negotiated bundled rates, to have complex procedures such as heart surgery.

What you should do

See who you’ll miss. Opting for fewer choices may mean saying goodbye to the practitioners you know, though that doesn’t mean you’ve been getting poor care — quality measures capture only one slice of a doctor’s practice. What’s more, local big-name and academic medical centers are often left out, says Andy Marino, who leads the development of the networks for Florida Blue. If you want the freedom to get care at any one of them after a serious diagnosis, this plan isn’t for you.

Meet the new folks. To learn more about the providers your insurer deems a good value, start on its website, which often has costs and quality stats. For the hospitals on the list, use the Hospital Compare tool at medicare.gov, which reports on quality measures such as readmissions, complications, mortality rates, and patient satisfaction. By 2014, Medicare plans to vastly improve a Doctor Compare tool. Until then, you can get a sense of a doctor’s bedside manner, at least, through patient reviews at Vitals.com and Healthgrades.com.

You’ll get a budget to pick your own plan

Your benefits department puts in the work of vetting insurers and designing a health plan. Up next: You could be doing the legwork on one of the many so-called private exchanges being rolled out, where you’ll have 10 to 30 options from five or so insurers. Your boss will still pick up a portion of the premium, perhaps a flat dollar amount. You’ll pay the rest with pretax dollars.

While just a fraction of firms use private exchanges, 25% say they are likely to in the next five years, says Towers Watson. The appeal? Companies hope insurers will compete on price, and benefit costs can become more predictable. For now, workers choose cheaper plans than their employers had provided about 90% of the time, says Alan Cohen, co-founder of Liazon, which runs an exchange.

Sure enough, this year when Darden, the company behind Olive Garden and Red Lobster, moved its 200,000 workers to a private exchange, roughly two-thirds ended up in a less expensive high-deductible plan. Darden employees can pick from five plan tiers, with the company chipping in a percentage of the cost of the mid-level plan. For more coverage, workers cough up the difference. Opt for a more bare-bones plan, and they spend less. “A lot of our employees weren’t meeting their deductible every year, so they bought down,” says Danielle Kirgan, a senior vice president for compensation and benefits.

The big unknown is how your employer’s contribution will change over time. So far companies are taking different approaches, says Cohen. Some, like Darden, aim to keep up with plan costs. Others may increase the budget, say, 3% a year, or not at all.

What you should do

Budget more time to shop. Think about everything you consider now — what doctors are in-network, what drugs are covered, what costs apply to the deductible, and what your maximum out-of-pocket is. But if plans in the exchange are not standardized, as some won’t be, that will take a lot more time than it does today.

Repeat annually. Because your employer’s contribution may not keep up with costs, it’s especially important that you don’t just automatically renew your plan.

Your choice is a high or higher deductible

It’s getting tougher to keep your costs in check. Lower-priced high-deductible health plans, which pair a big deductible (at least $2,500 for family plans, $1,250 for singles) with a tax-free health savings account you can tap for co-insurance and other costs or leave invested, will be on the menu at 67% of large firms in 2014, says Towers Watson. At 15% of them it will be the only option.

At Pitney Bowes in Stamford, Conn., big premium savings — about $500 a year for singles, a few thousand for families — have enticed some 40% of the company’s 20,000 employees to sign on to high-deductible plans since the option was added a few years ago. The hope at Pitney Bowes — and at every other company– is that having to cover more expenses will prompt you to be more cost-conscious. “The account makes employees think, Do I really need this care, and where is the best place for me to get it?” says Andrew Gold, who oversees the company’s benefits. Indeed, patient spending drops by 14% on average the first year families move to a high-deductible plan, a recent Rand study found.

Even if you stick with a traditional PPO plan, you’re on the hook for more — the average family deductible was $1,770 in 2012, up 70% from five years earlier, the Kaiser Family Foundation reports. Trouble is, when you’re footing the bill, you may hold off seeing the doctor. Studies show that high-deductible-plan patients skip necessary care, like cancer screenings, says Linda Blumberg, a senior fellow in the Urban Institute Health Policy Center. “People are not very good at discriminating between care they need and don’t need, and end up using less of both.”

What you should do

Add in all your savings. Even though your premium is lower with a high-deductible plan, you’re on the hook for more medical bills. So when it comes to choosing between a traditional plan or a high-deductible one with an HSA, the standard advice is to think how much care you’ll need beyond your annual physical, which is fully covered before you meet your deductible. Healthy workers tend to do best with these plans.

However, with normal deductibles rising and more employers putting seed money in your HSA, the risk you’re taking with a high-deductible plan may not be as great as it once was. And the tax savings you’ll get from an HSA changes the math, says Katy Votava, president of health plan consultants Goodcare.com. With a traditional PPO plan, you can use pretax dollars in a flexible-spending account to cover your out-of-pocket costs, but you can put in only $2,500 a year (and, unlike with an HSA, you lose what you don’t spend). In 2013 singles can save $3,250 in an HSA, and families can put in $6,450 (plus $1,000 if you’re 55 or older). A 56-year-old married person in the 28% tax bracket who fully funds an HSA saves $2,086 in federal income taxes.

Embrace your HSA. HSAs can be a great supplement to other tax-advantaged accounts. You can invest your HSA wherever you’d like, even if your company puts you in a default provider. As long as you have enough cash, either in your HSA or outside of it, to cover your top annual out-of-pocket costs, you can treat your HSA as a de facto extra retirement account and invest the extra in stock and bond mutual funds. HSAadministrators.com gives you access to 22 low-cost Vanguard funds for a $45 annual fee.

Check care costs. Now that you’re paying more of your medical bills, you might as well do what your boss is hoping: Be more price-sensitive when you choose a doctor and discuss treatments. Many insurer websites have tools that help you estimate out-of-pocket costs.

Now you really have to go to the gym

Four years ago Chester Clever, now 38, took his company up on the offer of a checkup at work. The incentive: zero co-pays for doctor visits on his health plan from Sierra Nevada Brewing in Chico, Calif. After learning he had high cholesterol, he began biking to work and eating healthier. “I feel a whole lot better than I did,” he says.

Those kinds of nudges from the boss to get in shape and see a doctor less are increasingly common: About two-thirds of employers offer financial rewards for healthy habits, says Towers Watson. Now the goal is to get results. By 2014 nearly half of large firms will tie the payout to a good outcome, such as better cholesterol or a lower body mass index (BMI), not just the effort, up from 16% who do so now. Next year Sierra Nevada plans to hand out prepaid cards worth $40 or so every quarter — programmed to pay for only healthy food — if your BMI falls between 18.5 and 27; workers outside those bounds who do improve will earn a partial reward.

More significantly, rewards are morphing into penalties. Instead of earning a $500 premium discount for joining a weight-loss program, you might have to pay $500 more if you’re overweight and doing nothing to shed the pounds. In 2014 that penalty can be as high as 30% of plan costs, up from 20% now. One of the goals of health reform was to ensure that no one could be charged more for insurance just for being sick. So this development isn’t sitting well with patient advocates. “We are concerned this is a way to backdoor medical underwriting and potentially leads to discrimination against people with illnesses,” says Dede de Percin, executive director of Colorado Consumer Health Initiative.

What you should do

Know your rights. If missing a BMI or blood pressure threshold has you paying more for insurance, under new federal rules released in May, your company must offer you another way to earn the reward, says Amy Moore, an employee-benefits attorney in Washington, D.C. If that alternative is based on another outcome, your doctor can work with your employer to find a solution.

Go beyond the rewards. Many employers say wellness initiatives save money and boost productivity. But so far research has found that while the programs help with smoking, there’s been less success with weight loss and exercise, says Janet Coffman, an associate professor at the University of California at San Francisco. So you need to take the lead. The single best way to stick with a healthy diet, studies find, is to write down what you eat every day. To keep yourself going to the gym, get a work-out buddy. You and your company will profit.

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