Dreaded annual task: Open enrollment for health insurance

One of the workplace's most dreaded annual traditions is nearly upon us.

For most employees, the fall brings open enrollment season for health insurance. That's when our bosses hand out fat packets of important but daunting information about health coverage for a new year. It typically includes cringe-inducing details about higher premiums, and this fall's edition will, too. It usually means making confusing choices.

And there's a new twist this year: The federal health-care overhaul brought some positive changes for consumers, such as fully covered preventive care, the end of lifetime limits and expanded coverage for adult children. The bad news is that the changes, and more to come, are contributing to rising costs and will require consumers to play a more active role in their coverage and wellness.

"Throwing the open enrollment kit on the desk and not looking at it isn't a viable option,"said Steve Graybill, a senior benefits consultant with human resources consulting firm Mercer in Charlotte, N.C. "Look at your choices and understand what you're buying."

It's wise advice that experts repeat every year, but it's challenging for many workers to sort out what's new, what's relevant to their needs and other issues.

Here's some advice on what you need to know as the open enrollment season arrives.

— Brace yourself

For starters, it shouldn't shock anyone who's had health coverage for the past 10 years that prices continue to climb, driven by medical inflation, and now there are added costs tied to health reform. That doesn't mean it won't hurt, especially as many workers are still reeling from pay cuts, furloughs or other reduced benefits.

Employees' cost of family coverage rose 14 percent this year to $3,997, according to an annual survey by the Kaiser Family Foundation. That's about 30 percent of the $13,770 total cost, up from 27 percent last year.

Some big employers are seeing total costs rise as much as 10 percent for 2011. But many midsized and small companies are seeing increases "north of 20 percent,"said John McDonnell, a principal with Progress Benefits Solutions in Raleigh. "In this economy, another $50,000 in annual premiums means a position the employer can't afford to fill."

While some employers continue to share the burden of higher costs, they also know that workers don't have many opportunities to jump ship when they're hit with higher premiums, deductibles and co-pays.

— Review your options

Most employers provide a choice of health plans with different levels of benefits and a range of prices. While it's tempting to simply pick based on monthly premiums, it's important to know how much health care your family consumes, what types of coverage you need and more.

"The HMO days of '$10 covers everything' are over,"said Steve Crist, a director of sales with Blue Cross and Blue Shield of North Carolina. "It's going to take us a while to get us out of that mindset."

Increasingly, employers are offering high-deductible plans of $1,000 or more, coupled with health savings accounts that allow consumers to set aside pretax money. While that concept scares some consumers, if you can get a handle on what you spend and what things cost, it can be a cost-effective option.

— Collect information

Most employers hold meetings where insurer representatives explain plans and answer questions. Never be afraid to ask questions. Most employers and insurers also provide information online.

"Every year, employees freak out about the costs,"McDonnell said. "Now there aren't as many complainers in the audience. It's more people trying to understand what's new and what they need to do."

— Use an FSA

You should sign up for a flexible spending account, which also allows pretax money to be set aside to cover co-pays, prescriptions, glasses and more. That money must be spent each year or it's lost, so keep track of it.

Starting next year, you need a doctor's prescription for over-the-counter drugs to be reimbursed. There are some exclusions to that rule, including insulin and first-aid supplies. Some FSA administrators are now using debit cards, which cuts costs but can create another hassle. For example, the cards can only be used for qualifying purchases, and you'll need to save receipts in case the expense is challenged.

If you're not sure how much you spent on health-related purchases last year, consider contributing a small amount this year to see how far it goes toward the expenses. The website www.SaveSmart SpendHealthy.com has basic information on FSAs, a savings calculator and a list of eligible expenses.

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