In Sickness and in Health Institutional Investor (01/02) Vol. 36, No. 1 p.97; St. Goar, Jinny
In order to offset rising health care costs, a handful of companies are offering medical benefits through what is considered a rough equivalent to a 401(k) plan. Under this consumer-driven plan, an employer contributes a certain pretax amount to an employee's account to cover out-of-pocket or premium expenses--the amount is a reimbursement paid to employees after a bill has been presented. The employer's contribution is credited toward the employee's deductible--around 10-25 percent typically. The average family makes a payroll deduction of around $1,000 to $4,000 annually, which funds the cost of the premium, but not the cost of the deductible. Once the employee has accumulated enough health care expenses to exhaust the employer's pretax contribution, the employee assumes the obligation for remaining out-of-pocket expenses, up to a specified cap--usually around $3,000-$5,000. The insurance policy covers any costs beyond that--about 80 percent of expenses typically--that are deemed "reasonable and necessary." Under this plan, the company's basic insurance coverage dictates which health care providers can be used and under what terms, but unlike traditional plans, if an employee does not spend the entire pretax deductible, that money can go into a tax-deferred plan similar to a 401(k).