Reuters Money

During this benefits-enrollment season, you may find a brand new choice in your menu of health plans. A growing number of employers are now offering high-deductible policies, or as they like to call them, “consumer-directed health plans.”

About 20 percent of large employers offered such plans last year, and 24 percent said they were “very likely” to offer them this year, according to data from Mercer Consulting. High-deductible plans carry premiums that are far lower than those of traditional HMOs, and they may offer a host of other benefits, too. But deciding whether to make the switch from your familiar HMO to one of these newfangled plans can be overwhelming.

First, some definitions. The two flavors of high-deductible plans are health savings accounts (HSAs) and health reimbursement accounts (HRAs). Some employers offer only one, while others may offer a choice.

An HSA is a a tax-exempt savings account that’s funded by you with money that you can use later to pay for health costs. Many employers also kick in contributions to HSAs, and they allow employees to invest the money in mutual funds and other traditional investment vehicles. Any funds you don’t use can be rolled over in perpetuity — meaning you can use your HSA anytime during your life to pay your medical bills — and you can take it with you when you leave your company.

HRAs can also be rolled over year-to-year, but that’s often where their similarity to HSAs ends. Employers have a lot of flexibility in designing HRAs, to the point where some plans may look exactly like traditional HMOs, with co-pays, preferred provider networks, and the like. Unlike an HSA, the HRA doesn’t have to be portable — it’s up to the individual employer to decide whether you can keep the money when you leave. “It’s really the company’s money,” explains Steve Wojcik, vice president of public policy for the National Business Group on Health. “It’s not an actual account. It’s just a promise that they’ll pay your medical expenses.”

If the alphabet soup of consumer-directed health care gives you a headache, you may not be the best candidate for one of these plans. That’s because participants in high-deductible plans have to be willing to shop around to figure out how to get the highest quality care at the lowest price. And you have to be comfortable with the idea of paying full-price for many of those services until you meet the deductible.

“So often people say ‘Wow, that deductible is huge,’” says Ingrid Lindberg, customer experience officer for Cigna. “But remember, what’s coming out of your paycheck is significantly lower, and your employer might be giving you seed money for your account.” In other words, you may save money in the long run.

And new rules under health reform might make high-deductible plans even more attractive. That’s because these plans will have to pay the full cost of preventative care — including checkups, mamographies and colonoscopies — even if you haven’t met your deductible yet.

For some forward-thinking patients, high-deductible plans are like found money.

Alexander Domaszewicz, a principal at Mercer, says he’s treating his HSA like a second retirement account. One year, after he met his $2,400 deductible, he decided to pay for the rest of his medical expenses with post-tax money rather than using the balance in his HSA. But he kept all the receipts, so someday he can get reimbursed, tax-free, from his account. “I’m letting the money sit in the HSA and grow. Then 20 years from now, and I can present the receipts and take the money out,” Domaszewicz says. “It’s like having an IRA that’s earmarked for health care.”

If you’re leaning towards making the leap into a high-deductible plan, you need to keep some restrictions in mind. For example, if you plan to insure an adult child, check with your employer to find out if the policy you’re considering will allow you to cover his or her medical expenses. You won’t be able to use HSA money to pay out-of-pocket medical expenses for adult dependents. (But you can with funds in an HRA or flexible-spending account.) And if you use the funds for something other than a qualified medical expense, you’ll pay a 20 percent penalty starting next year — double the fine that was assessed before.

All that said, a high-deductible plan can be well worth the hassle — for the right type of patient. “If you’re comfortable asking questions and paying attention to the value of your health care,” Domaszewicz says, “you can get a lot of value out of a consumer-directed plan.”

Photo: Medical paperwork and forms are seen at the Discovery Communications Wellness Center at the clinic in the  Discovery Communications headquarters building in Silver Spring, Maryland December 3, 2009.  REUTERS Jim/Bourg

Photo:  Alexander Domaszewicz is pictured in this undated handout photo. REUTERS/Handout/Mercer LLC