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PERSONAL FINANCE

Spouses Should Team Up on Health Coverage

Families can save big by coordinating insurance choices, though there's work involved.

October 15, 2006|Kathy M. Kristof | Times Staff Writer

Frank Tresnak figures that doing a few hours of work at this time last year saved him and his wife at least $1,700 in health expenses.

They both work and were offered health plans. Carefully coordinating those plans required a spreadsheet, but the end result, he said, was better coverage at a dramatically lower cost.

"We have two teenage boys in sports," said Tresnak, who lives in Scottsdale, Ariz. "It might not be as big a deal to some families, but we have to figure on a few trips to the emergency hospital."

Although paying attention to health choices during so-called open enrollment season is always recommended, experts said it is becoming increasingly pivotal for two-income families.

That's partly because there are more options than ever before. But it's also because an increasing number of companies are penalizing workers who double up on coverage.

"In the old days, if you both worked, spouses would be covered under both plans and you'd get 100% coverage," said Barry Barnett, a principal at PricewaterhouseCoopers, the big accounting firm. "But in the last two years, we've seen employers looking at whether the spouse has coverage under another plan. If they do, the company will charge more."

A national study by Mercer Human Resources Consulting found that 6% of employers charged higher premiums for spouses who could buy coverage from their own employers in 2005.

On average, the additional premium was $178 a month -- or $2,136 a year. An additional 5% of the companies surveyed expected to add such a provision this year.

"The numbers are definitely meant to be thought-provoking," said Blaine Bos, worldwide partner at Mercer in Minneapolis.

That adds another wrinkle to the already daunting job of choosing health plans, said Kirby Bosley, west division practice leader of the consulting firm Watson Wyatt Worldwide Inc., based in Arlington, Va.

In any given year, employees of large companies are asked to choose from an alphabet soup of plans, including HMOs, PPOs and so-called HSAs, or health savings accounts. Each is likely to offer a range of premiums, co-payments and deductibles. In some cases, coverage varies too.

To do a decent job of deciding what plan or plans to choose, families need to spread their options out on the table and compare, she said.

It makes sense to start by examining premiums. Consider, for example, the premium cost to cover the entire family under each plan.

Then calculate the cost when one employee covers him- or herself and the children under one plan while the spouse buys individual coverage under his or her own plan.

Next, look at deductibles. How much money must be paid out of pocket before the insurance kicks in under each option?

Then consider the scope of coverage. Are the doctors and services your family typically uses -- or is expected to use in the coming year -- available?

If not, how much would it cost to go out of the network and pay those bills individually?

The final step is to plug your family's real medical experiences into the equation. Using your most recent year's medical, dental and pharmaceutical bills, how much would come out of your pocket under each option?

Those considering high-deductible plans also should try to calculate the financial pain of their medical costs rising much higher than usual. That illustrates how much risk the family might face in a worst-case scenario.

This is the exercise Tresnak went through last October. He plotted premiums, co-payments and deductibles on a spreadsheet, using his family's healthcare experience the year before.

He also plugged the results into a program at paycheckcity.com to tally the costs of his healthcare decisions on an after-tax basis. (Most healthcare premiums are taken out of wages before taxes, but deductibles are often paid with after-tax money.)

The end result showed that Tresnak's family was better off buying basic coverage under his wife's plan and taking supplemental coverage under his, he said.

If the spouses had covered themselves under their own plans, they would have paid $1,700 more in premiums. Tresnak figured he'd have to become "catastrophically sick" before the higher premium would be recovered through additional insurance payments.

Meanwhile, under his own plan, he bought a supplemental policy that took care of the co-payments for hospital visits, he said. That paid off handsomely this year because both of his sons suffered foot injuries that sent them to the emergency room.

To be sure, creating the spreadsheet and comparing coverage was a lot of work. But he thinks it was well worth it.

"The worst thing that could happen is that you'd go through this exercise and find out that you'd only save a dollar or two if you coordinated coverage just right," Tresnak said. "But that's better than not doing it and finding out later that you could have saved hundreds of dollars if you took the time."

Indeed, said Bosley, the Watson Wyatt consultant, it's tempting to ignore open enrollment -- but it's costly.

"There is a very human tendency to say, 'This is too hard. Let's just forget it and do what we've always done before,' " Bosley said. "But we've gotten to a stage where there's a much greater potential cost in doing that."

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Kathy M. Kristof welcomes your comments. Write to Personal Finance, Business Section, Los Angeles Times, 202 W. 1st St., Los Angeles, CA 90012, or e-mail kathy.kristof@latimes.com. For previous columns, visit latimes.com/kristof.

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