With Out-of-Pocket Medical Expenses Rising, It Might Be Time for Insurance Change

by Lesley Politi on December 11, 2008

Eric Melton’s 10-year-old daughter has asthma and requires regular doctor visits and medication. Occasionally, he has to take her to the emergency room.

As a manager for Caribou Coffee, he has health insurance through Blue Cross/Blue Shield. But he still pays a lot out of pocket. For instance, he recently paid off a $558 bill from Children’s Hospital.

With three other children to support, he’s having a difficult time getting by.

“I’m spending half of my check on health insurance,” the 39-year-old District resident said. “I’m about to get a part-time job to make sure we have good health care and a nice roof over our heads.”

He thinks the situation is only going to get worse, what with a recession well underway. “Companies are going to want us to bear more of the cost,” he said.

So he’s wondering: Should he strike out on his own and find another health insurance plan outside of the company’s? “So many employees go with their company’s health care and think it’s a good deal, but maybe it’s not,” he said.

Melton is not the only employee noticing that health-care costs are taking a bigger chunk of disposable income. Hewitt Associates, a human resources consulting firm, has projected that employees’ out-of-pocket medical expenses for 2009 will increase 10.1 percent to an average of $1,880.

Greg Fernandez, managing member of National Capital Wealth Management in McLean, notes that many companies are now holding open enrollment periods for health insurance. He suggested that Melton first find out when his open enrollment is and review the options available to him.

Jennifer Owen, a certified financial planner at West Financial Services in McLean, said Melton should look at his 2008 expenses and measure them against plan offerings to determine a good fit. “It can be very helpful to ask questions of his human resources or benefits director,” she said. “Let them help him identify the best plan according to his needs.”

He should then compare not only the premium cost, but also deductibles, co-payment amounts, prescription coverage, the annual out-of-pocket maximum, the total lifetime benefit amount and whether his family’s current health-care providers participate in the network, said Susan E. Hamilton, a senior financial planner with West Financial Services.

He might also have to determine whether he has a choice between a health maintenance organization (HMO) or a preferred-provider organization (PPO). They are both managed-care systems, but if you’re in an HMO, you generally pick a primary-care physician who has to be consulted before you see a specialist. If you’re in a PPO, you can usually see a specialist without a referral. While Melton might lose the ability to choose his family’s doctors and have to deal with required referrals, he might have a lower co-payment for services, said Bruce K. Sneed, president of BK Sneed Financial Planning in Woodbridge.

One important thing to find out, the advisers said, is whether any of the plans have clauses for pre-existing conditions. Melton doesn’t want to switch plans only to find that his daughter’s asthma is not covered.

The advisers also said Melton should ask whether his company offers a medical care flexible-spending account. These plans work with existing health insurance. The employee sets aside pre-tax dollars for health-care expenses. Contributions are usually spread out over the year as payroll deductions. The employee can then withdraw the money tax free to pay out-of-pocket medical expenses.

However, these plans do not carry over from year to year, so participants have to be careful not to set aside too much. “The key is taking time now to assess your health-related expenses to include co-pays, deductibles, prescriptions, over-the-counter cold and allergy medicines, even contact lens solution,” Owen said.

Melton said he has been looking at health care plans not offered by his company. Sneed said, however, that group health coverage is generally cheaper than an individual plan. “Usually the employer subsidizes the employee cost of coverage and many times the family coverage cost as well,” he said.

That said, it wouldn’t hurt Melton to research other plans. He can do so online at Web sites such as http://www.ehealthinsurance.com.

Although he has employer coverage, he might still be able to apply for government medical aid for his daughter because of the large expenses, Sneed said. “If she is accepted, he would keep her on his group plan as the primary insurance and Medicaid would become her secondary insurance, picking up co-pays and authorized hospital visits for just her,” he said.

If that doesn’t work, he can try the State Children’s Health Insurance Program, which is a federal government initiative that gives states money to provide coverage to families with incomes that are modest but too high to qualify for Medicaid. Each state program has different guidelines. (The District’s program is called the D.C. Healthy Families Insurance Program.)

Finally, if Melton sticks with Blue Cross/Blue Shield, he could contact the company and request that a case manager review his situation to see whether there’s any way to reduce his costs. He should also be honest with the doctors and hospitals.

“He shouldn’t be afraid to negotiate with doctors and/or hospitals for out-of-pocket expenses,” Fernandez said. “Some doctors and many hospitals have discount programs in place for people paying out-of-pocket costs. And if they don’t, try to negotiate anyway.”

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