Your health plan: The next frontier (pg. 2)

  @Money July 26, 2013: 4:22 PM ET

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.

Related: The Massachusetts (health care) experiment

"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.

Related: Delay in Obamacare - what you need to know

"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.

Related: Here's the form to apply for Obamacare coverage

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

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. 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.

More: Now you really have to go to the gym

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