Question: Full-time workers in Hawaii have an opportunity to make changes to their health plans during open enrollment beginning next month. How can workers get their money’s worth from their health insurance benefits?

Answer: Due to Hawaii’s Prepaid Health Care Act, Hawaii employees are fortunate to have extensive benefits offered through their employer plan, and the health care benefits are similar. However, people can make choices regarding the degree of cost-sharing in the plan. If you take a higher deductible or co-payment, you will pay more out of pocket on your medical bill, but your health insurance premiums will be lower. It is also important that you obtain medical care and treatment from network or participating providers to minimize your out-of-pocket expenses.

Q: On average, how much do employees pay per year in medical premiums, and what can they do to curb health insurance costs?

A: On average, single monthly premiums range between $350 and $400. People may pay more because health insurers adjust their rates based on group utilization of medical services or medical loss experience. Increasing cost-sharing as discussed above can be a solution to rising premiums.

Q: What should employees look for when comparing health insurance policies?

A: A key decision is whether to go with a preferred provider organization (PPO) plan or health maintenance organization (HMO). In a PPO plan the insurance company contracts with a network of health care providers and hospitals (participating providers) that provide services at a discounted rate. Participating health care providers are paid on a fee-for-service basis and have agreed to accept the insurance company’s eligible charge as payment in full. Members can choose to use any participating provider within the network and typically pay a co-payment, which is a percentage of the eligible charge. As a member of a PPO, you may be able to seek care from a health care provider or hospital outside the network, but you will probably pay a higher deductible or co-payment in addition to the difference between the eligible charge and the nonparticipating provider’s charge, which could be fairly significant. The importance of seeing a participating provider to minimize out-of-pocket expenses cannot be over-emphasized.

With an HMO, the organization makes you choose a primary care physician (PCP) from a list of health care providers who are in the HMO. Your PCP is responsible for managing all of your health care. Generally, you must receive treatment from a provider within the HMO to have your claim paid. Providers within the organization are not paid on a fee-for-service basis. Members of the HMO can usually receive services with the HMO by paying a small flat-fee co-payment.  

Q: How can keeping yourself healthy help cut medical expenses?

A: One of the big drivers of increasing medical costs is poor lifestyle choices. Many people smoke, drink excessively, are overweight or take excessive risks, for example. We generally tend to be more sedentary nowadays and do not exercise enough. As a result of these lifestyle choices, higher utilization of medical services or an increase in the seriousness of the medical condition and treatment required is the result. Then we all end up paying more for our health insurance. Taking better care of ourselves, seeking timely and appropriate medical care will help moderate the health care increases. The Patient Protection and Affordable Care Act also provides for several free preventive health services. You should check with your health insurance company in this regard.

Q: Should workers use health savings accounts, medical savings accounts or flexible savings accounts to set aside pretax money for medical expenses? What happens if they don’t use all of the money before the year’s end?

A: Health savings accounts (HSA) are tax-free savings accounts used to pay qualified medical expenses for individuals, spouses or dependents. Savings roll over every year and funds are portable. HSAs are open to everyone with a high-deductible plan. Contributions by individuals are tax-deductible (minimum and maximum deductions may apply), and contributions by employers are not included in taxable income. Contributions per year can be up to the amount of the policy’s annual deductible. Funds can be used to pay deductibles, co-payments, prescription, over-the-counter drugs with a doctor’s prescription, long-term care insurance, and premiums if the individual is currently employed.

Medical savings accounts (MSA) and flexible spending accounts (FSA) are tax saving accounts designed for qualified out-of-pocket medical expenses. In an MSA, employers or employees are allowed to contribute to a savings account on a pretax basis and carry over the unused funds at the end of the year. One major difference between an MSA and an FSA is the ability under an MSA to carry over the unused funds balances and earnings to accumulate tax free. Unused funds in an FSA are lost if not spent prior to the end of the plan year. Unlike FSAs, most MSAs are combined with a high-deductible or catastrophic health insurance plan. MSAs are generally limited to small business or self-employed individuals.

The Prepaid Health Care Act makes it hard for those with insurance from their employers to use high-deductible policies and HSAs and MSAs. That said, these devices are generally a good idea because high-deductible policies can save you money on your premiums.

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Interviewed by Kristen Consillio