Tips For Open Enrollment 2023

After two years of relatively small increases in the cost of employer health insurance, the average cost will rise by 8.5% in 2024, to more than $15,000 per employee, according to Aon, a benefits consulting firm. Average costs are also rising for coverage sold on the Affordable Care Act marketplaces, with a median proposed increase of 6%, according to an analysis of insurers’ preliminary rate filings by KFF, formerly the Kaiser Family Foundation. 

The higher price tags are primarily due to the delayed impact of inflation, expensive prescription drugs and greater use of medical services by people who delayed health care during the COVID pandemic. But the effect on you may be very different. Because of the tight labor market, employers are looking for ways to reduce their costs rather than passing on most of the increases to employees. “Employers are a little reluctant to make large plan design changes or push as much of the extra costs onto employees because they want to attract and retain employees,” says Debbie Ashford, North America chief actuary for health solutions with Aon.

Most people who buy health insurance on the ACA marketplaces qualify for a premium subsidy to reduce their payments — and the enhanced subsidies that expanded the financial assistance during COVID have been extended through 2025. Many people will be able to find plans that have no premiums or plans that cost as little as $11 a month, says Cheryl Fish-Parcham, director of private coverage at Families USA, a consumer health care advocacy organization. Some states are offering additional subsidies.

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The coverage and costs can vary a lot, and it’s important to make smart decisions during open enrollment to choose the best plan for the upcoming year. Some new developments make it easier to compare plans, save money and benefit from extra coverage. The following strategies can help, whether you’re choosing an employer plan or buying your own coverage on an ACA marketplace for 2024.

How do you pick the best employer health insurance plan?

Even though the average cost of employer health insurance is rising by 8.5% next year, many employees will not see a hit that big to their paychecks.

“The labor market is making a big impact in terms of how companies are responding,” says Tim Stawicki, chief actuary of health and benefits, North America, for benefits consulting firm WTW. “Employers are walking a tightrope: How do they manage the rising costs in a way that does not impact their employees? I think there’s the recognition that for the past 20 years or more, there has been continued shifting of more costs to employees, and how much is too much?”

Overall, covered workers contributed an average of 17% of the premium for single coverage and 28% for family coverage (with employers picking up the remainder) in 2022, according to KFF’s most recent employee health-benefits survey. Covered workers at small companies contribute a higher percentage for family coverage, averaging 36% of the premium. The average employee contribution for single coverage was 16% at small firms and 18% at large firms. 

The averages also vary by industry, and some industries have been more reluctant to pass on increases to employees than others. For example, health insurance costs at manufacturing employers rose by an average of 3.1% from 2022 to 2023, and average employee paycheck contributions went up by 2.9%, according to the Aon study. But in the health care industry, employer costs increased by 3.2% while employee paycheck contributions rose by only 1.2%. In retail and wholesale trade, employer costs rose by 3.5% but paycheck contributions actually decreased by 0.5%.

Because of these variations, it’s important to consider all of your family’s options during open enrollment. Even if you’ve been happy with your plan, review all of your choices because the costs, provider networks and coverage for your health care and drugs can change — and your needs can change, too.

How to choose health insurance: seven tips

1. Compare options for both spouses. If you and your spouse work, one spouse’s plan may be a much better deal than the other’s. Consider the variations: You could each stay with your employer’s plan and include your children on the plan with better family coverage and costs. Or you could all go on one employer’s plan — although some employers do not permit spouses who have coverage available from their employer to join the plan, and others impose a spousal surcharge. 

Consider whether anyone in your family has specific needs for the year — such as an upcoming surgery, mental-health counseling or expensive prescription drugs — and find out how each plan covers their needs when you make your decision.

2. Compare all costs, not just premiums. Premiums are only one part of the costs. Also consider deductibles, co-payments and coinsurance (a percentage of the cost of a service). “Understand the costs coming out of your paycheck, your out-of-pocket costs and the network,” says Stawicki. "All of those are important in selecting a plan, and usually there are trade-offs."

For example, a policy with low premiums may have high deductibles or a limited provider network. And some employers that began offering only high-deductible policies years ago are once again offering lower-deductible options.

“As we face this affordability challenge, different people have different needs,” says Stawicki. “The reintroduction of a plan with a lower deductible and maybe a higher premium is something more employers are looking into as supporting the full breadth of their employee population.”

A low-deductible plan may have higher premiums but fewer out-of-pocket expenses and more-predictable costs throughout the year. If you’re healthy and don’t have many medical expenses, you could come out ahead with a low-premium, high-deductible plan. But you never know when you could get hit with a big bill.

“You want to consider the trade-offs between the premium and your deductible and what it means to have a large deductible in terms of your costs. Things do happen, and you could end up with a pretty big expense,” says Sara Collins, senior scholar and vice president of health care coverage and access for the Commonwealth Fund, which has been conducting health care policy research for more than 100 years. 

If you have an eligible high-deductible plan, your employer may contribute to a health savings account, which you should also factor into your calculations. Many employers offer tools to help you assess your options. 

3. Evaluate coverage for your providers. Find out whether your health care providers are covered by the plan, and consider how important it is to keep each of them. A plan with low premiums may have a limited provider network, and you could save money if you don’t mind changing some of your providers. Also find out whether the plan charges higher co-payments to see doctors who aren’t in the plan’s network or offers no coverage at all for out-of-network providers.

More employers are introducing lower-cost plans with “high-performing networks,” which are smaller networks of providers who are chosen because of their costs and health outcomes. “A high-performing network does not just focus on the cost but also wants to drive the best health outcomes for people,” says Stawicki.

4. Compare costs for your prescription drugs. The rising cost of prescription drugs is a big factor in health care inflation. Some plans have a separate deductible for prescription drugs, and the co-payments or coinsurance can vary significantly.

Coverage rules can vary, too. For example, interest in GLP-1 drugs, such as Ozempic and Wegovy, has surged. Most plans — 94% in a survey from the Business Group on Health — will cover approved GLP-1 drugs for diabetes. However, only 49% cover such drugs for weight loss, and the plans that do generally limit coverage to members with a body mass index of 30 or higher (or a BMI of 27 or higher for those who have other medical conditions). The plans usually require participation in a lifestyle-modification program as well.

5. Consider special health insurance needs for the year. “Look at your own personal situation and that of your family,” says Janet Faircloth, senior vice president of innovation and integrated solutions at Aon. For example, she says if you know you’re going to have surgery, you may want to look for a plan that has an arrangement with a “center of excellence” — a well-known hospital, often outside of the area, that specializes in the procedure you’re having. Your plan may even cover travel costs, and your out-of-pocket costs may be lower, too.

In 2024, nearly 80% of the large employers surveyed by the Business Group on Health will have arrangements with centers of excellence for transplants, 72% will have them for bariatric surgery, and at least half will have them for fertility treatments, musculoskeletal procedures, and cancer and cardiac care. 

6. Learn about extra coverages. Expanding coverage for mental-health issues is a priority for many employers: 70% of the large employers surveyed by the Business Group on Health will offer no- or low-cost virtual counseling in 2024, and about one-third are offering on-site mental-health counselors. More than one-third will cover out-of-network treatment for mental-health and substance-abuse disorders. 

Many employers also offer employee-assistance and wellness programs, as well as support programs for people with chronic conditions — for example, a support counselor for someone with diabetes. “Employees may not know these resources and support are available,” says Stawicki. 

Employers are also offering more tools to help employees choose a plan and make decisions when they need care. “They’re helping individuals navigate the health care system more effectively, finding the best providers based on quality of services,” says Faircloth. 

 7. Find out about subsidies. If your employer’s coverage is unaffordable, you may qualify to get a less-expensive policy with premium subsidies from an ACA marketplace.

You generally can’t get a subsidy to buy marketplace coverage if your employer offers health insurance, but there is an exception if your employer’s plan is unaffordable based on premiums or out-of-pocket costs. A policy is considered to be unaffordable if the premium is more than 9.12% of your income or the actuarial value of the policy is less than 60%, which means the health plan pays an average of less than 60% of enrollee health care costs. “A lot of people aren’t aware that if they have a plan that isn’t affordable by ACA standards, they are eligible for marketplace subsidies,” says Collins. 

The calculations can be complicated, but you can get help from a navigator in your area who assists with marketplace plans. Go to www.healthcare.gov/localhelp and type in your zip code. Under “type of local help” you can click on “assister” to find a navigator who is trained and certified to help with marketplace questions.  

Buying healthcare coverage In the marketplace: four steps

If you buy health insurance on your own through HealthCare.gov or your state’s marketplace, you may benefit from some new developments. Enhanced subsidies can reduce your costs significantly, and some states are offering additional help. It has also become easier to compare plans, thanks to the streamlined coverage options that were introduced in 2023. 

Open enrollment for states that participate in the federal marketplace at HealthCare.gov runs from November 1 to January 15. You need to enroll by December 15 for coverage to start January 1. The states that run their own marketplaces have similar open-enrollment periods. The following steps can help you choose a marketplace plan.

1. Focus on the after-subsidy price. Find out whether you qualify for a premium subsidy, and focus on the after-subsidy cost — that’s what you’ll actually pay. The subsidies were expanded significantly in 2021 and extended through 2025. Previously, they were available only to people whose income was less than 400% of the federal poverty level, but that’s no longer the case. Instead, the enhanced subsidies assume that a household should contribute no more than 8.5% of household income for health insurance costs, with lower-income households contributing a smaller percentage to the premiums. “The enhanced subsidies have really made a big difference for a lot of people,” says Collins.

You can get a quick estimate by using the calculator at www.kff.org/interactive/subsidy-calculator. You can get specifics at HealthCare.gov or your state marketplace. See HealthCare.gov for links to the 17 states (and the District of Columbia) that run their own health insurance marketplaces. “I think the really important takeaway for consumers is that the full price is not the price a lot of consumers have to pay,” says Fish-Parcham. “A lot of people are eligible for reduction in premium costs, so they should check what their premiums would be before they panic.” 

The subsidy is a premium tax credit based on your income for the full year. Estimate your annual income when you apply for a policy, and then reconcile that number with your actual income when you file your federal tax return. If you earn more than expected, you may have to pay back some of the subsidy. If you end up earning less, you could get more money as a tax refund.

2. Find out whether you’re eligible for cost-sharing subsidies. Premiums are only part of the decision. Some policies with low premiums have high deductibles, co-payments and other out-of-pocket costs. But people whose income is less than 250% of the federal poverty level can also qualify for cost-sharing subsidies to help reduce their deductibles and co-payments. For 2024, the income limit will be $36,450 for an individual, $49,300 for a couple and $75,000 for a family of four (higher in Alaska and Hawaii). You can get the subsidy only if you buy a silver-level plan.

Some states offer additional help. “About 600,000 of our enrollees will see reduced out-of-pocket costs,” says Jagdip Dhillon, a spokesperson for Covered California, the state’s health insurance marketplace. They may qualify for a zero-dollar deductible and reduced costs for primary-care visits, specialist visits, generic drugs and other expenses for several of the silver plans.

3. Compare the standardized plans. One of the biggest developments in the HealthCare.gov federal marketplace was the introduction of standardized plans in 2023.

The Affordable Care Act originally created four levels of plans on the marketplaces labeled with different types of metals. Platinum plans offer the most coverage and usually have the highest premiums. At the other end of the spectrum, bronze plans have the highest cost-sharing and lowest premiums. Gold and silver plans fall between platinum and bronze. These plans are divided by category based on their overall actuarial value, but they could have different deductibles and co-payments. 

The standardized plans set a specific deductible, co-payment or coinsurance for each type of service — such as a $2,000 individual in-network deductible in 2023 for the standardized gold policy; a co-payment of $30 for a visit to a primary-care doctor or $60 for a specialist visit; 25% coinsurance for inpatient hospital services; and a $15 co-payment for a generic drug or $30 for a preferred brand-name drug. 

“You know exactly what these plans cover in terms of your cost-sharing responsibilities, so you can compare the various premiums and networks. It simplifies choice,” says Collins. Insurers can also offer a limited number of non-standardized plans.

4. How to put it all together. When it comes to selecting a health insurance plan, consider the coverage you can afford, whether a particular plan offers the services you need before you pay a deductible, whether the cost-sharing for the services is affordable, and the plan’s provider networks and quality ratings, says Fish-Parcham. 

Preventive care is not subject to a deductible, and some plans cover other care without requiring you to meet the deductible first. “Think of the services you regularly use. Do you have to meet the deductible before the plan will pay for them or not?” asks Fish-Parcham. “With some plans, the deductible will apply to hospital and emergency care and brand-name drugs, but you may get generic drugs, mental-health care and preventive care without it.” A health care navigator can help you with these complicated decisions, too. 

“In my county, there are 150-some plans. People get overwhelmed,” says Jodi Ray, a senior consultant for Florida Covering Kids & Families, a program that provides navigators throughout Florida (www.coveringflorida.org). “I try to look for the best option based on their health-care needs, their doctors and their financial needs.”

Note: This item first appeared in Kiplinger's Personal Finance Magazine, a monthly, trustworthy source of advice and guidance. Subscribe to help you make more money and keep more of the money you make here.

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