Your Guide to Open Enrollment 2023
Health care costs have continued to rise, but employers are enhancing benefits for 2023.
Inflation has made everything from gas to eggs more expensive, and health care is no exception: Costs rose 8.2% in 2021, the biggest jump since 2018, according to the Business Group on Health. Besides being affected by overall inflation, health care prices were pressured by a surge in claims from consumers who scheduled appointments and procedures they had put off during the pandemic. Those factors continued to drive up costs in 2022. For the 2023 health insurance plans that workers will choose during the upcoming open-enrollment period, premiums are set go up some more, rising up to 8%, according to the Segal Group, a human resources and benefits consultant.
A lot of large employers are providing better access to therapy and other well-being benefits in response to concerns about the effects of the pandemic on employees’ mental health.
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Many employers also plan to offer a suite of virtual care services in 2023, ranging from lifestyle coaching to diabetes management. More than 90% of large employers plan to offer tele–mental health services, and 77% plan to provide those services at little or no cost to employees.
Employers are also looking for ways to drive down costs of cancer treatment, which is one of the top three factors pushing health care costs higher. Half of employers plan to add providers that are recognized for providing top-quality cancer care, and 11% plan to cover multi-cancer early-detection blood tests in 2023, according to the BGH survey.
Most of the costs of expanded benefits will be borne by the boss. Employees of large companies will be responsible for 22%, on average, of their total health care premium costs in 2023, unchanged from 2022 and 2021, according to a survey by human resource firm Mercer.
Employers are increasingly tying health insurance premiums, deductibles and other costs to salaries, which means higher-paid employees may pay more for health care. According to the BGH, 37% of employers implemented this type of cost-sharing in 2022, with a modest increase expected in 2023.
It may be another year before we see all the cost increases triggered by inflation, says Suni Patel, Mercer’s chief actuary for health and benefits. “Because health plans typically have multiyear contracts with health care providers, we haven’t felt the full effect of price inflation in health plan cost increases yet,” he says. He expects the full impact of inflation to hit in 2024.
At the same time, though, employers need to make benefits competitive to attract and retain employees in a tight labor market, says Tracy Watts, Mercer’s national leader of U.S. health policy. Along those lines, employers are also beefing up ancillary benefits, such as paid leave for parents and eldercare services.
How to Choose the Right Plan
Picking the right insurance plan—whether it’s just for you or for you and your family—will come down to your health needs. While in recent years an increasing number of employers have been offering high-deductible health plans—sometimes as the only option—Watts says the number of employers offering only these plans has decreased going into 2023. “It goes back to affordability,” Watts says. “Not everyone wants to pay for their care out of pocket when needed.”
As a result, you may see more choices this year, including one offering low deductibles, such as a preferred provider organization (PPO) plan. Co-payments, coinsurance and deductibles may be lower in PPO plans, but they typically come with higher premiums than high-deductible plans.
A high-deductible plan often comes with a health savings account, which makes it more palatable. HSAs are funded by contributions from you and, in some cases, your employer. In addition to allowing you to save for out-of-pocket costs, such accounts come with some major tax perks: Contributions are made on a pretax basis (or they’re tax-deductible, for HSAs that aren’t sponsored by an employer), and money in an HSA grows tax-deferred. Withdrawals are tax-free for qualified medical expenses. As a bonus, you can contribute to the account until you retire, then use the funds to cover medical expenses during retirement.
To qualify for an HSA in 2023, you must sign up for a high-deductible health plan with a minimum deductible of $1,500 for self-only coverage or $3,000 for family coverage. Maximum contribution limits for the year are $3,850 for self-only coverage or $7,750 for family coverage. Workers who are 55 or older by the end of the year can put in an extra $1,000 in catch-up contributions. However, your contribution limit is reduced by any amount your employer contributes. So if, for example, your employer kicks in $500 annually to your HSA, the maximum you can contribute will be $3,350 for single coverage or $7,250 for family coverage.
How to Crunch the Numbers
Even if you’re leaning toward selecting the high-deductible option, run the numbers for each plan. To make an apples-to-apples comparison, add up the monthly premium payments that would be deducted from your paycheck and the deductible you or your family would have to meet; for the high-deductible plan, subtract your employer’s HSA contribution.
Your employer may provide a comparison tool through its open-enrollment portal to make the task of comparing plans easier. The tool typically allows you to run scenarios with estimates of various claim amounts for the year. From there, it should show you an estimate of your total expense.
When you run these comparisons, Patel says, “you’re estimating your risk tolerance and your ability to take on additional risk.” For example, some workers may choose a high-deductible plan because its lower premium will result a larger paycheck, recognizing that they’ll pay higher out-of-pocket expenses until they meet their deductible.
Next, look at the provider networks to see if anything has changed. Employers are making adjustments to their networks to keep costs down, Patel says. Many are trying to shrink the number of hospitals and doctors in the plan network without sacrificing quality of care. If your current doctors are no longer in network—and you’re not inclined to switch providers—look up your plan’s out-of-network costs. Typically, in-network care is cheaper because the insurance company has negotiated rates with the provider. Going out of network means you are subject to a provider’s non-insurance rate.
Under the Affordable Care Act, preventative care services, such as annual physicals, blood pressure screenings, and flu and shingles vaccines, should be provided at no cost. For more on preventative services—and what to do if you’re charged for them—see How to Appeal an Unexpected Medical Bill.
Finally, make sure you understand all of your insurance terms. More than three-fourths of Americans don’t know the correct definition of coinsurance, according to a recent Forbes Advisor survey. Coinsurance is what you’ll pay for a service after your deductible is met. Typically, your insurance company picks up 80% of the tab, and you pay the remaining 20%. This differs from a co-payment, which is usually a flat fee that could be as low as $25.
Once you’ve selected a medical plan, you need to choose your vision and dental plans. You usually have a choice between a high-cost and a low-cost dental plan, but usually just one vision plan is offered. High-cost dental plans may pick up more of the tab for major dental work, such as crowns or non-adult orthodontics.
If you’re not sure which plan is right for you, review the dental work you’ve had in the past year. Past explanation of benefit (EOB) forms should be available through your current provider’s online insurance portal. For vision, read in detail how much your insurance pays for new glasses and contact lenses. Typically, your annual eye exam is covered at no cost to you.
Finally, just as with your main medical providers, double-check to determine whether your current dentist and optometrist are in your new insurance network. If not, you may need to switch to a new provider.
In some cases, you may decide it’s worth going out of network to keep your current provider. For example, if your current optometrist is tracking developments related to diseases such as glaucoma, starting over with new tests may be more trouble than it’s worth. Ask the insurer how much your out-of-pocket costs would be, remembering that you can use funds from an FSA or HSA to pay for them.
How to Manage Prescription Drug Costs
Another big driver of the rise in health care premiums is the cost of prescription drugs—a major concern among large employers, according to the BGH survey.
Pharmaceutical companies are raising prices charged to private health insurance plans in anticipation of lower reimbursements for some drugs covered by Medicare. Under a provision in the Inflation Reduction Act, starting in 2026, Medicare will be allowed to negotiate prices for the 10 highest-cost drugs covered by Medicare Part D. The number will increase to 15 Part D drugs in 2027, 15 Part B and Part D drugs in 2028, and 20 Part B and Part D drugs in 2029 and beyond.
If your out-of-pocket costs for prescription drugs increase, there are ways to keep your expenses in check. Make a list of your prescriptions, and dive into how they would be covered under a new plan. Typically, coverage is split into categories, with generic drugs requiring the lowest co-payment. Co-payments for nonpreferred, name-brand drugs are usually higher, and some drugs may not be covered.
Keep in mind that it may be less expensive to pay cash at a big discount retailer, such as Walmart, than to fork over the co-payment your insurance plan requires. You may be able to save even more by using drug manufacturer coupons provided by GoodRx.com or through your doctor. If the costs of your current drugs will rise steeply with a new plan, ask your doctor for a list of lower-cost alternatives. Then go back and rerun your cost analysis.
How to Go on COBRA or Sign Up for an ACA Plan
If you recently left your job, you have two options for health insurance: Get coverage under COBRA (the federal law that lets you keep health insurance coverage through your former employer for up to 18 months) or buy a plan on the government’s marketplace. If you choose COBRA, you won’t have to change providers, but it comes at a steep cost.
When you sign up for COBRA, you’re responsible for both the employer and employee portion of your health insurance premiums, plus an administrative fee of about 2%. To estimate your COBRA costs, you need to know how much your employer subsidized your health care. You can find this information on the COBRA election notice your employer provides or through your human resources department.
A less-pricey option may be an Affordable Care Act plan, available through HealthCare.gov or your state’s health care exchange. And thanks to the Inflation Reduction Act, enhanced subsidies for these plans are expected to stay until 2025. Those who are self-employed and adults who are no longer eligible to stay on their parent’s insurance plans—the cut-off is age 26—will also benefit from the expanded subsidies.
Rivan joined Kiplinger on Leap Day 2016 as a reporter for Kiplinger's Personal Finance magazine. A Michigan native, she graduated from the University of Michigan in 2014 and from there freelanced as a local copy editor and proofreader, and served as a research assistant to a local Detroit journalist. Her work has been featured in the Ann Arbor Observer and Sage Business Researcher. She is currently assistant editor, personal finance at The Washington Post.
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