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What to expect when you choose a health plan

(This is part of a five-story package on employee benefits and open enrollment season.)

By Lauren Young

NEW YORK (Reuters) - Make way for open enrollment season, the time of year when those wordy benefits packages stuff your inboxes. Once again, workers face higher healthcare costs, but what else can employees expect from insurance plans? Tracy Watts, a partner with benefits giant Mercer, explains what's new for employees in 2013, including the impact of healthcare reform.

Q. How much more should employees expect to pay in healthcare premiums next year?

A. Premiums are going to go up 6 or 7 percent, on average, in 2013 - that's pretty consistent with the past five or six years.

The average annual cost of employer-sponsored coverage is $10,000 per employee. On average, most employers pay 80 percent of that cost. So if employers pay $8,000 of total premiums and employees pay $2,000, that means cost will go up about $140 annually, on average, for most people.

If you have two-person or family coverage, your contributions may go up even more.

Q. What other changes should employees expect?

A. For starters, more people will have the option to enroll in some type of consumer-directed plan.

On average, at least 32 percent of large companies are currently offering them, up from 2 percent in 2005.

Q. If you've never used one of those plans before, what do you need to watch out for?

A. Typically, these plans will have higher deductibles than you've seen before in a traditional plan, known in the industry as a PPO (Preferred Provider Option.)

If you are considering one of these plans - we call them account-based plans - look beyond the deductible to see what kind of account is attached to the program. Will your company put money in the account for you, or will you be able to earn money to offset the deductible if you complete a health assessment or participate in biometric screening?

Keep in mind that there are two kinds of accounts - health reimbursement accounts (HRAs) and health savings accounts (HSAs). If your employer offers a reimbursement account, your deductible might not be as scary. However, if you leave your job, you can't take the money that's left in your account with you. The employer keeps it.

What's cool about the HSA is that the money in your account is your money, which you can carry over from one year to the next. It gives you a lot of flexibility. You get a big tax advantage since you accumulate money tax-free and use it on a tax-advantaged basis. Plus, it's a great way to build up funds for retiree medical costs.

Q. How will the new healthcare law affect our coverage at work?

A. While the main provisions of the new law won't go into effect until 2014, we've already seen companies expand coverage for dependents. The new law expanded eligibility to age 26.

Enrollment in company-sponsored plans increased as a result of this change, so employers will be protecting themselves with greater price increases. We have seen the contribution requirements for dependent coverage increase steadily since the law passed.

In March, you'll get information about new public exchanges, which will be open to people without insurance. One of the requirements of the law is that employers have to notify their employees in advance of the open enrollment period about these exchanges. If your company provides benefits to you, you will not be eligible for government-subsidized coverage in the exchange.

Also, there's going to be a limit on how much you can put in flexible spending account in 2013. There's a $2,500 cap per employee - your employer got to set that cap before. Mercer's survey data suggests the average contribution to a flexible spending account is $1,700, and the participation rate is less than 22 percent at large companies, so it shouldn't have a huge impact on most people.

A lot of people were worried that the push for wellness programs would go away with the new healthcare law. In fact, the new healthcare law requires plans to cover preventive coverage at 100 percent. In addition, the law expanded the level of incentives (for health-related behaviors) that plan sponsors can offer.

Q. Are prescription costs or co-pays going to change much?

A. They go up a little bit every year.

Companies are pushing workers to use mail order prescription plans - it requires a degree of organization not all of us have. The vendors have gotten better at making it easier for people to order online. Now many also send email reminders to refill your prescriptions.

It is cost-advantageous to use the mail order option, so if you are somebody who has maintenance medication, investigate how you might use it. There's no downside - you just have to remember to reorder in time for it to be mailed to you before you run out!

Q. What's new with wellness plans?

A. The newest development are incentives to get you involved in taking care of yourself. There's typically a progression for how the incentives work.

For example, in year one, you are given an incentive to complete a health assessment. It might be through lower premiums or money in an account. In year two, you are given an incentive to do a biometric screening, which could include blood work to look at cholesterol and lipid levels along with a blood pressure check. In year three, there are ranges, and if you are in healthy range, you get an incentive, and if you don't meet it, you are offered an incentive to participate in a program that would qualify you for the incentive.

I have client that gave all employees an electronic pedometer called the Fit Bit to track activity levels. That same client just kicked off a competition for employees to measure their sleep patterns. The research on sleep health shows that how much you sleep has as much of an impact on your health status as what you eat and how you exercise.

We know medical insurance is the most highly valued benefit for employees, even if they complain about it. Employers get that. Employers remain committed to providing coverage to employees because they see the link to productivity.

(For more data on how employer provided health benefits are changing, see the Reuters graphic at http://link.reuters.com/xyp23t).

The YOUNG BUCKS column appears monthly and at additional times as warranted. Lauren Young tweets at www.twitter.com/laurenyoung. Read more of her work at blogs.reuters.com/lauren-young

(Editing by Jilian Mincer, Linda Stern and Steve Orlofsky)

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