Health care costs hit post-pandemic highs. Open enrollment movements can help

About 165 million Americans get their health insurance through work, yet most don't spend much time considering what their employer offers in terms of benefits and how much it will cost.

In fact, employees only spend about 45 minutes a year, on average, deciding which benefit options are best for them, according to an Aon report.

Open enrollment season, which typically lasts through early December, is an opportunity to take a closer look at what's at stake.

And costs are rising sharply to boot.

The cost of healthcare has been steadily increasing for years. More recently, there has been a notable jump.

For employers, those cost increases are reaching a post-pandemic high, according to WTW, a consulting firm formerly known as Willis Towers Watson. U.S. employers project their healthcare costs will rise 7.7% in 2025, compared to 6.9% in 2024 and 6.5% in 2023, the firm said.

Because of higher costs, employers are considering new ways to adjust their plan offerings, WTW found.

Until then, 52% of companies said they plan to implement programs that will reduce overall costs, and many intend to target lower-cost providers and sites of care, which may mean a tighter network of doctors among which ones to choose.

Currently, employers subsidize about 81% of health plan costs, on average, while employees pay the rest, according to professional services firm Aon.

However, some of the higher costs will inevitably be passed on to employees as well.

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About a third, or 34%, of employers expect to shift some spending to employees through higher premiums or increasing co-pays on high-deductible health plans in the next year, the WTW report found.

The cost per employee is expected to rise 5.8% on average in 2025, marking the third consecutive year of health benefit cost increases above 5%, after a decade of an average of only about 3%, according to a separate report by consulting firm Mercer.

“These are changes that employees will feel,” said Beth Umland, Mercer's director of health and benefits research.

For workers, health care expenses are already high: Family premiums for employer-sponsored health insurance rose 7% this year to an average of $25,572, according to KFF's 2024 Benchmark Employer Health Survey. Workers are responsible for more than $6,200 of that amount, while employers pick up the rest.

“With cost increases reaching a post-pandemic peak, companies are concerned about the burden this places on their workforces, especially as it impacts decisions about insurance coverage and care,” Tim Stawicki, chief actuary, said in a statement. of WTW health and benefits. .

Employees are often presented with options for selecting health insurance plans: one with a higher monthly cost, known as the premium, and a lower deductible, which is the amount you'll have to shell out before the plan of your employer takes effect, and another option. with higher out-of-pocket costs but lower premiums.

“Most of the time when you go through open enrollment, the first thing you see is deductible and out-of-pocket costs,” said Regina Ihrke, WTW's health, equity and wellness leader for North America.

When weighing options, use previous years as a guide, advised Gary Kushner, president of Kushner & Company, a benefits management and design firm.

He said to consider: “Am I a low, medium or high claims family? Did I have an incident that required intensive care or basically a lot of preventive care?”

If you normally only go to the doctor, say, once a year for a checkup, you may want to opt for a so-called high-deductible plan, with a lower monthly cost.

In addition to a high-deductible health insurance plan, more than 50% of employers also offer a health savings account, or HSA, which can help with additional health care costs.

To be able to use an HSA, you must have an eligible high-deductible health plan. The IRS defines “high deductible” as at least $1,650 for individual plans or $3,300 for family coverage by 2025.

The IRS also determines the maximum allowable contribution each year: the new HSA contribution limit for 2025 will be $4,300 for individuals, up from $4,150 in 2024, and $8,550 for families, up from $8,300 in 2024. Employees age 55 or older More can earn an additional $1,000 catch-up contribution over the IRS annual limits.

HSA contributions then grow tax-free and the funds can cover out-of-pocket expenses, including doctor visits and prescription medications, including expensive weight-loss medications.

As costs continue to rise, HSAs are a key safety net for managing these out-of-pocket expenses, WTW's Ihrke said. Any money you don't use can be carried over from year to year.

“Be sure to consider how to put some money in that savings account so you can use it to pay the doctor bill or save it for future years,” Ihrke explained.

During open enrollment, employees may also be presented with different life and disability insurance options, which are often included in a standard benefits package.

Employer-issued life insurance policies are typically equal to one year's salary. You can purchase additional life insurance through your employer. This is called supplemental life insurance or voluntary life insurance, and it is optional coverage you can add to your employer's basic group policy.

With disability insurance, there are two basic types: short-term disability typically replaces 60% to 70% of your base salary, and premiums are typically paid by your employer. Long-term disability, which typically sets in after three to six months, typically replaces 40% to 60% of your income.

Even if you have these policies through work, it could be a fraction of what you need to protect young children or other dependents.

Consider what amount is right for you and your family, then evaluate whether you want to purchase additional coverage or supplemental insurance through your workplace's group plan or purchase your own policy, a move many advisors recommend.

Additional benefits may be optional, but equally important today, especially when it comes to wellness. Upon entering open enrollment, nearly 1 in 5 employees cite a decline in their mental health, according to a recent Gallagher report.

“More than ever we see employers looking to address the growing needs of their workforce,” said Tom Kelly, director of Gallagher's health and benefits practice, and “today's employees are seeking more comprehensive wellness support.”