Weighing the pros and cons of your health plan

Here's a frightening statistic. A recent survey of small businesses from Salary.com showed that one out of seven is offering employees significant incentives not to take part in the company health plan. That's right, not to take part. What are we talking about? Lump sum salary increases, cash rebates and contributions to retirement accounts or other benefit plans, says Richard Cellini, chief of research for Salary.com.

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Of course, this is happening because health care costs are on the rise. According to a new report from the U.S. Agency on Healthcare Research and Quality, employees who get health coverage through their employers paid an average 79 percent more for their coverage in 2003 than they did in 1996. That's a result of the fact that employers themselves are paying more, and they're passing along a bigger chunk of the premium to their workers. On average, workers contributed nearly $2,300 annually toward coverage for a family of four, and these numbers (the most recent available) are nearly two years old.

What's a stretched family, or individual, to do? You may want to consider taking your employer up on his offer, says Cellini. After all, when the next open enrollment period rolls around (typically in the fall), you can get back on the company plan if need be. How do you decide whether this is a prudent move.

Consider how much you can save
At some companies, the offer is for $100 a paycheck. At others, it's $100 a month. You need a dollar figure before you can go out and look for an alternate policy.

Can you get coverage elsewhere?
If you're married or have a domestic partner, look into the cost of getting on his or her policy. Of course you'll pay to add members to that plan, but compare the costs to see if you can save on the premium.

How much will it cost you to buy in the individual market?
Depending upon your life circumstances, you may be able to find coverage that's more reasonable than what you're paying at the office, says Emily Fox, spokeswoman for eHealthInsurance.com, the leading health insurer online. If you're past your child-bearing years, you may not want to pay for maternity coverage that's bundled into your at-work policy. If you're a young guy in good shape, you may not want to pay for chiropractic care. Both of those moves can save you money.

Look at small differences between the policies
They can add up to big dollars. When employers want to cut the cost of their insurance premiums, some switch from PPOs to HMOs. Others increase the co-pay. The difference between a $10 co-pay and a $20 co-pay can turn into hundreds of dollars a year — particularly if you have a chronic condition (or kids).

Finally, don't even think of going bare
Among those filing bankruptcy each year in America, the largest number of them do so because they had health problems — and no insurance. I know it's tempting to pocket the cash. It's also incredibly short-sighted.

Jean Chatzky is the financial editor for “Today,” editor-at-large at Money magazine and the author of “Talking Money: Everything You Need to Know About Your Finances and Your Future.” Her latest book, "Pay It Down: From Debt to Wealth on $10 a Day," is now in bookstores. Copyright © 2005. For more information, go to her Web site, www.JeanChatzky.com.