Employer Open Enrollment: Make Benefit Choices That Work for You

Employer Open Enrollment: Make Benefit Choices That Work for You

By Raj Chokshi, CPA, MBA, CFP®

According to the Kaiser Family Foundation, the average cost of health coverage for a family of four was $25,572 in 2024. While employers contributed the lion’s share, $6,296 of that amount was paid by employees. Employees have largely been spared from painful premium hikes over the last few years, but 2026 is likely to be a different story.¹

In one recent survey, employers projected a 10% spike in health care expenses, largely due to soaring prices for specialty prescription drugs.² As an employee, you may want to brace yourself for higher monthly premiums or out-of-pocket costs, and possibly even significant changes to your health coverage.

Open enrollment is the window of time, typically in the fall, when employers introduce changes to their benefit offerings for the upcoming year. Absent a qualifying life event, this may be your only chance to make important decisions that will affect your health care choices and your finances.

Even if you are satisfied with your current health plan, it may no longer be the most cost-effective option. Before you make any benefit elections, take plenty of time to review the information provided by your employer. You should also consider how your life has changed since last year, and any plans or potential developments for 2026.

Here’s a short guide designed to help you make the most of your workplace benefits:

Assess your Health Plan Options

The details matter when it comes to selecting a suitable health plan. One of your options could be a better fit for you (or your family) and might even help reduce your overall health-care costs — but you will have to look beyond the monthly premiums. Policies with lower monthly premiums tend to have more restrictions or higher out-of-pocket costs (such as copays, coinsurance, and deductibles), when you do seek care for a health issue.

To help you weigh the tradeoffs, here is a comparison of the five main types of health plans. It should also help demystify some of the terminology and acronyms used so often across the health insurance landscape:

Health Maintenance Organization (HMO) – Coverage is limited to care from physicians, other medical providers, and facilities within the HMO network (except in an emergency). You choose a primary-care physician (PCP) who will decide whether to approve or deny any request for a referral to a specialist.

Point of Service (POS) Plan – Out-of-network care is available, but you will pay more than you would for in-network services. As with an HMO, you must have a referral from a PCP to see a specialist. POS premiums tend to be a little bit higher than HMO premiums.

Exclusive Provider Organization (EPO) – Services are covered only if you use medical providers and facilities in the plan’s network, but you do not need a referral to see a specialist. Premiums are typically higher than an HMO, but lower than a PPO.

Preferred Provider Organization (PPO) – You have the freedom to see any health providers you choose without a referral, but there are financial incentives to seek care from PPO physicians and hospitals (a larger percentage of the cost will be covered by the plan). A PPO usually has a higher premium than an HMO, EPO, or POS plan and often has a deductible.

A deductible is the amount you must pay before insurance payments kick in. Preventative care (such as annual check-ups and recommended screenings) is often covered free of charge, regardless of whether the deductible has been met.

High-Deductible Health Plan (HDHP) – In return for significantly lower premiums, you’ll pay more out-of-pocket for medical services until you reach the annual deductible. HDHP deductibles start at $1,700 for an individual and $3,400 for family coverage in 2026 and can be much higher. Like PPOs, HDHPs often cover certain preventative care without a deductible. Care will be less expensive if you use providers in the plan’s network, and your upfront cost could be reduced through the insurer’s negotiated rate.

You must be enrolled in an HDHP in order to establish and contribute to a Health Savings Account (HSA), to which your employer may contribute funds towards the deductible. You can elect to contribute to your HSA through pre-tax payroll deductions, or make tax-deductible contributions directly to the HSA provider, up to the annual limit ($4,400 for an individual or $8,750 for family coverage in 2026).

HSA funds, including any earnings if the account has an investment option, can be withdrawn free of federal income tax and penalties if the money is spent on qualified health-care expenses. (Some states do not follow federal tax rules on HSAs.) Unspent balances can be retained in the account indefinitely and used to pay future medical expenses, whether you are enrolled in an HDHP or not. If you change employers or retire, the funds can be rolled over to a new HSA.

Three Steps to a Sound Decision

First, add up your total expenses (premiums, copays, coinsurance, deductibles) under each health plan offered by your employer, based on last year’s usage. Your employer’s benefit materials may include an online calculator to help you compare plans by taking factors such as your chronic health conditions and regular medications into account. You might also want to consider each plan’s maximum out-of-pocket, which is the most you would have to pay for covered health services in the plan year.

Second, if you are married, you may need to coordinate two sets of workplace benefits. Many companies apply a surcharge to encourage a worker’s spouse to use other available coverage, so look at the costs and benefits of having both of you on the same plan versus individual coverage from each employer. If you have children, compare what it would cost to cover them under each spouse’s plan.

Third, before enrolling in a plan, check to see if your preferred health-care providers are included in the network.

Tame Taxes with a Flexible Spending Account (FSA)

If you elect to open an employer-provided health and/or dependent-care Flexible Spending Account (FSA), the money you contribute via payroll deduction is not subject to federal income and Social Security taxes (nor generally to state and local income taxes). Using these tax-free dollars to pay for health-care costs not covered by insurance or for dependent-care expenses could save you about 30% or more, depending on your tax bracket.

The federal limit for contributions to a health FSA was $3,300 per employee in 2025 and may be slightly higher for 2026. Some employers set lower limits. (The official limit for 2026 has not yet been announced by the IRS). You can use the funds for a broad range of qualified medical, dental, and vision expenses.  Keep in mind that you can’t contribute to a FSA and a HSA in the same plan year.

Due to recent tax legislation, you may be able to contribute 50% more (up to $7,500 a year, per household) to a dependent care FSA starting in tax year 2026. Account funds can be used to pay for eligible child-care expenses for qualifying children ages 12 or younger. The current $5,000 limit has been in place since 1986, so this overdue increase could be especially good news for parents grappling with  today’s high child-care costs.³ The substantial tax savings on contributions can help offset the cost of a nanny, babysitter, day care, preschool, or day camp, but only if the services are needed so you (or a spouse) can work.

One drawback of health and dependent-care FSAs is that they are typically subject to the use-it-or-lose-it rule, which requires you to spend everything in your account by the end of the calendar year or risk losing the money. Some employers allow certain amounts (up to $660 in 2025) to be carried over to the following plan year or offer a grace period up to 2½ months.

Still, you must estimate your expenses in advance, and your predictions could turn out to be way off base. If you have leftover money in a FSA, you should consider your account balance and your employer’s carryover policies when deciding on your contribution election for 2026.

Other Benefits to look at (if offered)

There are many other benefits your employer may offer that are worthy of a second look.  Of course, that depends on each employer and what they offer.  Here are a few that you should look at:

Disability – In your peak earning years, a disability is more likely than an untimely death.  We would suggest you look at your options and maximize the long-term and short-term options your employer provides.  Employers typically cover up to 60% of your salary in disability benefits, with some costs shared by employees. 

Life Insurance – Some employers provide up to $50,000 in coverage for free, but then you can purchase additional coverage if you don’t have adequate coverage outside of your employment.   Employers may even offer spousal coverage with little to no underwriting – if you have health conditions that preclude you from buying coverage separately, then this would be a good time to assess this. 

Retirement Savings Plans, 401(k) – Though you can change your contribution amounts during the year, this is a good time to make sure you are on track to maximize these contributions.  The standard limit for 2026 is $24,500 (up from $23,500 in 2025).  The standard catch up contribution for age 50+ is projected to increase to $8,000, up from $7,500 in 2025.  At least once a year, you should look at your beneficiaries on your retirement and stock plans.  Make sure this is consistent with your estate plan.

Of course, all employers have differing coverages and options.   We are here to help!  Reach out to your Bluerock Wealth Management team with questions. 

Raj Chokshi, Partner and Wealth Manager

Sources:

1. Kaiser Family Foundation Employer Health Benefits Survey. Kaiser Family Foundation, 2024.
2. Society for Human Resource Management, 2025.
3. The National Law Review, 2025.

Hightower Advisors, LLC is an SEC registered investment adviser. Securities are offered through Hightower Securities, LLC member FINRA and SIPC. Hightower Advisors, LLC or any of its affiliates do not provide tax or legal advice. This material is not intended or written to provide and should not be relied upon or used as a substitute for tax or legal advice. Information contained herein does not consider an individual’s or entity’s specific circumstances or applicable governing law, which may vary from jurisdiction to jurisdiction and be subject to change. Clients are urged to consult their tax or legal advisor for related questions.