Medical care & Coverage is going way up in 2006

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A Bad Case Of Sticker Shock

Next year's health benefits will cause you to say " Ouch! " Here's what the

most important changes will look like -- and how painful they'll be

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If you work for a company that starts its fiscal year on Jan. 1 -- and 70%

of employers do -- the 2006 benefits package should soon hit your mailbox.

Brace yourself for sticker shock: You may even feel a little sick when you see

the combination of higher costs and reduced coverage.

That's because your employer is paying an average of 8% more, an extra $600,

for your health insurance in 2006, according to human resources consultant

Towers Perrin in Stamford, Conn. And since employers are foisting more of the

burden off on employees, your tab will go up even higher: an average $155

more for health care in 2006, up 10% from 2005. To keep costs in line, there's

a

good chance you'll be offered the option of a high-deductible plan that lets

you choose how you spend your health-care dollars. You can also expect to

see higher costs for prescription drugs and larger deductibles. Also new: More

companies are offering financial incentives to participate in wellness

studies.

Here's a look at some of the key changes to 2006 benefits plans and what to

consider before signing up:

A Good Plan?

HIGH-DEDUCTIBLE ACCOUNTS

Just a few years ago, these plans -- which make the employee responsible for

a bigger portion of their medical costs in exchange for a lower premium --

were scarce. Now 20% of employers offer a high-deductible plan, according to

the Henry J. Kaiser Family Foundation. Ray Herschman, a health-care consultant

at Mercer Health & Benefits in Cleveland, predicts that half of the

companies with 5,000 or more employees will offer a high-deductible plan next

year,

in addition to more standard choices such as indemnity, point of service, and

health maintenance organization (HMO) plans. Some smaller companies may even

replace conventional plans with high-deductible versions.

High-deductible plans come in two flavors: health reimbursement accounts

(HRAs) or health savings accounts (HSAs). The key difference is the HRA is

funded by the employers and any unused cash belongs to the company. With the

HSA,

employees make contributions with pretax dollars -- and employers may or may

not match them -- and unused cash belongs to the employee. Because more of

the financial burden is on the employee, consultants say more companies will

choose HSAs.

With either account, employees can expect to pay deductibles of at least

$1,000 for individuals and $2,000 for families. HSA participants may fund an

account well beyond the deductible with pretax contributions up to $2,650 for

individuals and $5,250 for families. (There's no limit on HRA contributions.)

Both plans cover 100% of all medical expenses once the deductible has been

reached. And both usually pay 100% of preventive-care costs that don't count

toward the deductible. There are no co-payments.

Viewed as investments, HSAs are similar to a 401(k) -- the participants

choose among an array of investment options. The account's earnings are not

taxed

-- whatever isn't used is rolled over to the following year.

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HRAs and HSAs should appeal to you if you are generally healthy and don't

rack up many bills. (The average person spends less than $700 for health care

annually, according to Stacey, senior consultant at Hewitt Associates

(HEW) in Lincolnshire, Ill.) That's why Ron Sussman, president of CPI Cos., a

financial-services firm in Voorhees, N.J., plans to add an HSA at his

13-employee company. " The amount of money we are paying for health insurance is

ridiculous, and it drives me nuts because we are not using the benefits, " says

Sussman, 47.

HSAs also are a good tool for self-employed workers who need tax shelters.

" You not only get to write off premiums, but you get to make tax-deductible

deposits into your HSA, " says Steve Sharkey, a brokerage representative at

Alden, a unit of Assurant (AIZ), in Philadelphia.

Before you sign up, pay attention to fees. Some plans charge up to $50 per

year in administrative fees, although larger plans may drop those costs. In

addition, look at the underlying investment options to make sure they'll help

you meet your savings goals.

Too Much?

CO-PAYS AND DEDUCTIBLES

Those $15 or $20 co-payments you shell out for your point-of-service or

preferred provider organization plan every time you visit the doctor may

disappear for some plan participants. Instead, you'll be required to pay an

up-front

deductible of about $300. After you meet that deductible, expect your insurer

to pay 90% of any costs if your doctor is within the plan's network.

(Insurance often pays only 70% if it's out of network.)

PRESCRIPTION DRUGS

Co-payments for brand-name drugs (typically $20 to $30 each time you fill a

prescription) will be about $5 higher in 2006, although generic-drug

co-payments ($10 to $15) should be about the same, consultants say.

Pharmacy-benefit

managers say that fewer than 20% of all employees currently take advantage of

mail-order drug plans, but if you use one, you can save as much as half on

any medications you take on a continuing basis. Plus, it's convenient. " It's a

heck of a lot easier to have the stuff arrive in your mailbox every 30

days, " says Tom Billet, a senior consultant at benefits firm Wyatt (WW)

in

Stamford, Conn.

If you don't go for online purchases, your plan might force you. More

employers are implementing mandatory 90-day mail-order programs for maintenance

drugs such as Lipitor, a cholesterol-fighting drug, to cut costs. If you take a

drug on an ongoing basis, your only option may be to buy three months' worth

through the mail. " You can't keep going back to your pharmacy and buying it

over and over, " Billet explains.

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WELLNESS SURVEYS

More companies are asking their employees to fill out online health

assessments with financial incentives. At Xerox (XRX), for instance, employees

who

participate in an online health appraisal earn $200 in health-care discounts.

" After answering questions on stress, their weight, cholesterol, and other

health topics, employees who are deemed to be high-risk in three areas are

eligible to work with a free health coach, " says Kara Choquette, a Xerox

spokeswoman.

At international pharmaceutical giant AstraZeneca, employees save $50 a

month if they take part in a new online health survey -- a quick $600 off their

annual health-care bill. " In the first 10 days, we already had over 50% of

employees participate in the assessment, " says Carla Burigatto, an AstraZeneca

(AZN) spokeswoman. With health-care benefit costs continuing to move in just

one direction, who wouldn't jump at any opportunity to save?