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WORKPLACE
Give Your Income a Boost
by Melynda Dovel Wilcox

If your pay increase for 2005 turns out to be smaller than you expected, blame it on health-care costs. And if the workload seems to be stretched over fewer people, blame it on ... health-care costs.

For the fifth straight year, employers are facing double-digit increases in health-insurance premiums. Companies are now spending 9% of payroll on health benefits, and some firms cite the high cost as one reason they have been slow to add full-time employees, even as business picks up.

What's different this year is that companies will be introducing some innovative solutions during this fall's open season for benefits.

Yes, you'll see the usual quick fixes: higher deductibles, co-payments and premium contributions. More companies are replacing their fixed-dollar co-pay for prescription drugs with a percentage share of the cost.

But a growing number of companies are offering so-called consumer-driven plans designed to give employees greater freedom to manage their own health care and possibly save money. Your company might offer you a lower-cost, high-deductible policy to cover catastrophic illness, and then kick in additional money to a reimbursement account you could use for out-of-pocket expenses. Some companies -- especially smaller ones that haven't offered health coverage -- are gravitating toward the new health savings accounts.

The key to controlling costs over the long run is to ward off claims before they're made, says Barry Barnett, a principal with PricewaterhouseCoopers's Human Resource Services group. One company pays employees $25 to take an online health assessment. If you're at risk for heart disease, for example, you might get a $50 contribution to your flexible-spending account if you work with a nurse to modify your lifestyle and diet. Another employer, Pitney Bowes, actually lowers drug co-payments for people with chronic illnesses, such as asthma, to encourage them to use preventive medication.

Reevaluating your options will be time -- and money -- well spent. If both you and your spouse are covered separately through your jobs, for instance, moving both of you to one plan could cut your costs.

Most employers offer a range of plans -- high-end, midprice and budget -- and 60% of employees pick the Cadillac. You might come out ahead by choosing the Toyota, with its lower premiums, and boosting contributions to your flexible-spending account.

Open season is also a good time to look over your other benefit selections. For 2005, the annual maximum contribution to your 401(k) plan rises to $14,000, or $18,000 if you'll be 50 or older by the end of the year. Be sure to review your named beneficiaries for pension and life-insurance plans, especially if you got married or started a family.