For millions of American workers, the final quarter of the year is when they receive information about their company's benefit plans for the coming year. This is the workers' chance to add or drop various kinds of insurance, change plans or otherwise adjust their benefits.
For better or worse, it's the time when employers, too, can make changes. And if this year follows the pattern of recent history, the most common change most workers will see is a rise in the cost of their health insurance.
Workers will also find less choice in health insurance plans, more pressure to use "in-network" doctors and hospitals (those that have cut deals on prices with the employer or insurer) and in some cases enticements to join programs to help insurers gauge their health risks and take steps to ease them.
The most dramatic change, which some workers, including federal employees, will see is the offering of full-scale "consumer-driven" health insurance plans, which let workers make many of their own health care spending decisions.
Talks with benefits consultants here and elsewhere in the country suggest that the most common changes workers can expect to see for next year are:
* Higher costs. No surprise here. Although several recent surveys have found that the rate of medical cost increases has eased somewhat, the increases have certainly not stopped. Thus, premiums are likely to rise again, and many employers expect to shift a bit more of the rise to workers.
But Tom Billet, a benefits consultant with Watson Wyatt Worldwide in Stamford, Conn., noted that many employers are trying to hold the line on premiums while shifting the cost of their plans more toward those who use them. This typically means higher co-payments -- the amount, typically a flat fee, that workers pay when they visit a doctor or other health care provider. It could also mean co-payments for services such as hospital visits where there may not have been any before.
Similarly, deductibles may rise, meaning the amount employees have to pay before their insurance kicks in could be higher.
"What we see consistently with companies who manage costs well is a bias toward more cost sharing in the plan rather than in the [premium]. This channels more cost to the users of the plan, which most would say is fair," Billet said.
Also, he said, "that's the point where people can make decisions about how much care to get and how much to spend. If you pay a lot through your paycheck and very little to use the plan, you say, 'I might as well use it.' That's not a good incentive."
Another twist that is emerging is extra charges for workers who want to carry working spouses on their plans. Companies generally find dependent coverage even more expensive than coverage for individual workers, and are saying, in effect, if your husband has insurance at work, he should be on that plan, not ours.
Billet said he sees problems with this. Spouses enter and leave the workforce, gaining and losing health insurance, making it difficult to track. And, he said, employers don't have a good way, other than asking, of knowing whether a worker's spouse could get insurance elsewhere.
The continuously changing landscape means that, in making next year's choices, a worker should carefully consider his or her health situation, and the spouse's. A healthy person likely will be better off choosing a plan with lower premiums and higher use costs, but a person with lots of health problems may be better off paying more in premiums in exchange for lower co-pays and deductibles.
* Consolidation of offerings. Over the past 20 years, companies have tried offering an alphabet soup of plan designs -- HMOs (health maintenance organizations), PPOs (preferred provider organizations), POS (point of service) plans -- to provide employees with choice. But costs have continued to rise, and employers are realizing that when workers say "choice," they don't mean they want a lot of different plan designs -- they mean they want to be able to choose their doctors.
So, many companies are trying to streamline their offerings and in the process perhaps cut better deals with providers.
That means workers may see fewer HMOs offered, for example. If the employer offers only one, it can promise the provider more participants and perhaps drive a better bargain.
HMOs remain the lowest-cost of the conventional options, according to a recent survey by the Kaiser Family Foundation, but they have been losing market share over the years.
In some ways, HMOs have taken unfair criticism, said Martha Priddy Patterson of Deloitte Consulting in Washington.
"HMOs provide good, Chevrolet[-level] service, but when people get sick they want Rolls-Royce coverage," Patterson said. "Ultimately, and ironically, HMO participants may get Rolls-Royce treatment," but they have to clear more hurdles to get it, which puts many people off, she said.
The big winner in recent years has been the PPO, which has had more than half the market since 2002, according to Kaiser.
In a PPO, workers are encouraged to use an in-network doctor, but if they want to use someone else, they can. They just pay more.
"People like the concept of being able to go outside the network, even if their intention is not to," Billet said. "It's mental insurance" and it's "a big factor" in the preference for PPOs over HMOs, he said.
A variation on this, not widely seen in the Washington area, is the "tiered" network, in which workers pay at several levels even inside the network, with the lowest costs for doctors and hospitals that have been found cheapest and most effective.
POS plans have declined in popularity recently. These are hybrids between HMOs and PPOs in which participants get in-network prices if they go first to a primary-care physician for referral to specialists or other doctors, but they pay higher, out-of-network prices if they "self-refer."
* Preventive care. A growing number of employers are offering workers incentives to participate in health surveys and other kinds of health assessments. The idea is to catch unhealthy conditions and lifestyles, and nudge (or pressure) the worker to take preventive action before something serious and expensive happens.
Some plans have "health coaches" who try to work with employees to improve their health.
"The idea of a health coach and preventive care is, let's get a base line of where you are right now. If you're healthy, great. You probably won't hear from them. But if they pick up markers, like your blood pressure is really high, you really should do something about this, here's what we suggest," Patterson said.
A variation on this is what has come to be called disease management. Typically, this is employed to help workers with serious or ongoing health problems such as heart disease, diabetes or asthma.
The plan works specifically with such patients to, first, get them the best care, and make sure, in the case of a person with multiple ailments, that it is coordinated. Then the plan works with the person to make sure he or she takes any prescribed medicines and to try to make lifestyle changes that will improve health.
Employers have found preventive programs "are a great way to save money," Patterson said.
* Consumer-driven plans. In hopes of introducing market-style economic pressure into health care, some theorists have been urging that health plans involve participants in spending decisions, and reward them for saving money. As a result of law changes in the past few years, several such plans are now allowed.
One modest, and generally peripheral, version of consumer-driven health care has been around for years, in the form of a pretax flexible spending account (FSA). But FSAs are typically an add-on to a conventional insurance plan.
With an FSA, workers pick an amount to set aside pretax, and are allowed to spend it tax-free on a fairly broad list of health-related items. But if this set-aside money is not used, it is forfeited to the employer, creating for workers a perverse incentive to spend the excess at the end of the year, whether or not they need the new eyeglasses, or hearing test, or new supply of cold remedies.
The newer consumer-driven plans, known as health reimbursement arrangements (HRAs) and health savings accounts (HSAs), are fundamentally different from traditional health plans. They generally combine a tax-free or tax-deductible savings or investment account with a high-deductible insurance policy. Workers pay routine health expenses out of the savings account, and use insurance only for extraordinary and expensive needs.
These are quite new -- HSAs, a particular pet of the Bush administration, were enacted only last year, and regulations were still dribbling out well into this summer. But, said Patterson, "I frankly have been somewhat surprised at the number of [employers] that have taken them up."
A Deloitte survey of more than 300 mostly large employers found that 19 percent already offer an HRA or HSA, and an additional 14 percent "definitely" plan to offer one for 2005 or 2006.
In some cases, employers are deciding to eliminate traditional health plans and make an HRA or HSA their only plan. "That would be a radical new offering," Patterson said, but it is a way of dealing with the problem of "adverse selection," which might easily arise if employees are allowed to choose between a consumer-driven plan and a traditional one.
About 20 percent of the "early adopter" companies went to an HRA or HSA exclusively, the Deloitte survey found.
HRAs and HSAs are broadly similar, but there are important differences. While an HSA has very specific requirements for a high-deductible insurance plan, an HRA does not. HRAs are usually coupled with high-deductible plans but don't have to be.
Also, the savings account portion of an HRA must be entirely employer-funded, and typically is not actually a cash account, but instead is "all on paper," said Paul Fronstinof the Employee Benefit Research Institute here. When the employee draws on the account, the employer pays out of its pocket, he said. Thus, if the employer folds, "you're out of luck," Fronstin said.
The savings portion of an HSA, by contrast, can be funded by the employer, employee or both, and it is a cash account that may be invested with institutions such as banks and mutual funds.
Since the worker is allowed to roll funds forward from year to year in an HSA or HRA, a young, healthy worker could accumulate a significant nest egg over time -- a feature that critics fear will undermine traditional plans by leaving them with only the older, sicker employees.
Also, critics worry that low-income workers won't have the money to fund the savings account, leaving them vulnerable to unmanageable medical expenses if someone gets seriously ill.