Open Enrollment for Employer-Sponsored Health Insurance

The majority of non-elderly Americans get their health insurance through an employer-sponsored plan. And many companies—especially larger employers—offer several health plan options that may have different costs and benefits.

Your employer's annual open enrollment period is your opportunity to sign up for health insurance or make changes to your coverage—including dropping your coverage, if you've got another option elsewhere. It's definitely in your best interest to take an active look at your coverage options during open enrollment, instead of just letting your existing plan auto-renew for the coming year.

Although employers can have health plan renewal dates that don't follow the calendar year, most employers choose to align their plan year with the calendar year. In that case, they'll generally schedule open enrollment for sometime in the fall, with changes effective January 1. Check with your company’s human resources department to find out when your open enrollment period begins and ends, and when enrollments or plan changes go into effect.

The length of open enrollment will vary depending on the company, but it usually only lasts a few weeks. If you miss your company’s annual open enrollment, you may not be able to enroll in your employer's health plan—or make changes to your existing coverage—for another year.

(Note that the open enrollment period in the individual market begins on November 1 every year in all states except New York, where it starts November 16. And the open enrollment period for Medicare Advantage and Medicare Part D starts on October 15 every year. But these enrollment windows do not apply to employer-sponsored plans.)

Choosing a Health Plan During Open Enrollment

Make sure to look carefully at all your health plan options to decide what plan is the best fit for you and your family. Many people choose the plan that has the least impact on their paycheck—the plan with the lowest premium. However, that may not be the best option for you.

Your company should provide you with written materials that explain your benefits. Many employers offer benefit plan meetings where you can ask questions about your health plan options. If you do not understand your insurance options, ask for help. Remember, once you make a decision, you won't be able to change plans until next year unless you experience a qualifying life event.

Understand basic health insurance terms

If you don’t understand health insurance terminology when you're selecting a plan, it could cost you more during the coming year. Some important things to learn about are:

• What is the difference between a copayment and coinsurance?
• What is an annual deductible and how can it impact your monthly premiums and out-of-pocket expenses?
• What is a provider network and what happens if you use a healthcare provider who is not in the network?
• What are the differences between PPOs, EPOs, and HMOs, and which one is the best choice for you?
• What is an HSA-qualified high-deductible health plan, and how does an HSA (health savings account) work?
• How is an HSA different from an FSA or an HRA?

Examine your health care spending over the past year

Review the medical care and costs that your family used this year and think about changes in the healthcare services you may need in the coming year. For example, are you planning to have a child, or was someone in the family recently diagnosed with a chronic illness such as diabetes?

Check to See If Your Healthcare Providers Still Accept Your Insurance

Before you fill out the paperwork to switch plans, confirm that your doctor, physician's assistant, or nurse practitioner, and preferred hospital are part of the network for the health plan you are choosing.

Your providers may not be in the network of the new plan, and this isn't something you want to find out later on, when you're trying to schedule a medical appointment. For that matter, it's important to check that your providers are still in-network even if you're opting to keep your current coverage since providers can come and go from insurance networks at any time.

5 Things to Watch Out for During Open Enrollment

Employers are trying to save money, especially as the cost of health care continues its relentless climb. One way to do this is to reduce health insurance benefits (ie, higher deductibles, copays, and total out-of-pocket costs) and/or shift more of the premium costs to employees.

Make sure to carefully read your health plan materials, as you may find that your benefits and costs will change for the coming year, even if you make no changes yourself.

1. Check to see if your dependents—spouse, partner, and children—are covered and be sure you understand how much their coverage costs. Under the Affordable Care Act (ACA), all large employers (50 or more employees) are required to offer coverage to full-time employees and their dependents, but they are not required to offer coverage to spouses. Most employer-sponsored plans continue to be available to spouses, but surcharges apply in some cases. Employers are also not required to cover any of the cost of premiums for dependents, although most do cover at least some of the cost. Be sure you understand how your employer's plan will cover your family members. And be aware that as of the 2023 plan year, the "family glitch" has been fixed, which means that if your employer's offer of family coverage is considered unaffordable, your family members may be eligible for subsidies in the ACA-created exchange/marketplace in your state.
2. Review any prior authorization requirements required by the plans. Under the ACA, employer-sponsored health plans cannot impose pre-existing condition waiting periods (neither can individual market plans, with the exception of grandfathered individual plans), but insurers can and do still require pre-authorization for non-emergency care.
3. If you take prescription medications, check them against the list of approved drugs (formulary) for the health plan (or plans, if there are multiple options) your employer offers. Also, if you take an expensive brand-name medication, find out the amount of the copayment or coinsurance for each medication on each available plan.
4. If you or any family member needs ongoing physical therapy, or has a mental health issue that requires therapy, review what your health plan will and will not cover. The ACA requires individual and small group plans to cover all of the essential health benefits without a dollar cap on the total amount the insurer will pay (although the insurer can impose limits on the number of visits they'll cover). But the essential health benefits requirements do not apply to large group plans, so be sure you understand the limitations of the plans you're considering.
5. Check to make sure that you and your family have adequate coverage for emergencies if you are traveling either in the U.S. or in a foreign country. You may find that you need travel medical insurance during such trips, which is something you'll want to understand ahead of time.

The Effect of the Affordable Care Act on Your Benefits

Several additional provisions of the Affordable Care Act impact group health insurance. These changes, which you should know about when choosing a health plan provided by your employer, include:

• You can keep your adult children on your employer's health plan until they are age 26, although this may or may not be the best choice for your family (it will depend on things like the total premium cost, whether your young adult child lives nearby, whether they need maternity care, etc.).
• For services that are considered essential health benefits, health plans cannot impose dollar caps on how much they'll pay in a given year or over your lifetime. This applies to both large and small group plans; large group plans do not have to cover all of the essential health benefits—although most do—but to the extent that they do cover essential health benefits, there cannot be any lifetime or annual dollar caps on how much the insurer will pay for those services.
• There are upper limits on the out-of-pocket maximum exposure that health plans can have for covered in-network care (these rules don't apply to grandfathered or grandmothered plans). For 2023, the upper limit on out-of-pocket costs is $9,100 for an individual and $18,200 for all family members covered under the same plan.

Some Tips From Dr. Mike

Typically, if you pay a higher premium, your annual deductible and copayments will be lower, and/or you'll have a broader provider network that you can use. Therefore, you may want to consider a plan with higher premiums and lower out-of-pocket expenses if you anticipate using a lot of healthcare services throughout the coming year. And, if you are young and healthy and do not have any children, you may want to choose a plan with low premiums and higher out-of-pocket expenses. 

But this generalization isn't always true—sometimes you'll come out ahead in terms of total costs by picking a lower-premium plan, despite the higher out-of-pocket costs, even if you end up having to meet the full out-of-pocket limit for the year. 

If your employer offers an HSA-qualified plan, give it careful consideration, especially if your employer will make a contribution to your HSA on your behalf. Once you factor in the tax savings, lower premiums, and employer contribution to the HSA (if applicable), you might find that the HSA-qualified health plan is the best choice, even if you're anticipating fairly high medical costs during the coming year.

Although your employer-sponsored plan is most likely your least expensive option and offers better coverage, you may be able to opt-out and shop around. Speak with a health insurance agent in your community or check out the plans available on HealthCare.gov.

If your employer is offering affordable health insurance that provides minimum value, you won't be eligible for premium subsidies (premium tax credits) in the exchange. But depending on the plan your employer offers, whether your employer covers part of the premium for family members, and how much health care you anticipate using, it's possible that a plan purchased in the individual market could present a better value, so it's worth your while to check.

Summary

Employer-sponsored health plans have an annual open enrollment period. This window gives eligible employees an opportunity to enroll in health coverage, switch to a different plan (if more than one option is offered), or drop coverage altogether. Employer-sponsored plans often follow the calendar year, with open enrollment in the fall and the new plan taking effect January 1. But some employers have a different schedule, so it's important to understand how this works for your employer's coverage.

During open enrollment, there are a variety of factors that employees should keep in mind when determining which health coverage will be the best option for the coming year. If you miss open enrollment, you'll have to wait until the following year to add, drop, or change your coverage, unless you experience a qualifying life event.

A Word From Verywell

It's tempting to just glance at the health benefit details your employer provides each year, particularly if you're healthy and not in need of significant medical care. But it's worth the time it takes to carefully review your options. You'll want to consider both best-case and worst-case scenarios in terms of total costs, and also pay attention to the provider networks for the plans available to you. You'll also want to consider whether it makes sense to enroll in your spouse's health coverage (if available) instead of taking the plan that your employer offers.