GUIDE TO OPEN ENROLLMENT
Kiplinger's Personal Finance|November 2021
Health care costs continue to climb, but subsidies will make some plans more affordable.
RIVAN STINSON

It has been said that nothing is certain except death and taxes, but you can add a third item to the list: rising health care costs. Large employers expect health care expenses to increase 6% in 2022, for a total of about $16,300 per employee (including contributions from both the employee and employer), according to the Business Group on Health’s annual survey. Although large employers expect hospitalizations and other costs associated with COVID-19 to contribute to the increase in health care spending, they predict that treating conditions such as cancer, diabetes, and heart disease will have an even greater impact.

Health care costs were flat in 2020 compared with 2019 because the pandemic led consumers to delay everything from elective surgery to annual physicals, and some consumers continued to postpone treatment in 2021. As the pandemic wanes, though, employers expect workers to schedule makeup appointments and surgeries. In addition, more than three-fourths of large employers predict that employees with chronic conditions, such as diabetes and heart disease, will increase their use of health care services, according to the Business Group on Health.

Meanwhile, to keep their health care costs down, some employers are tying premiums, deductibles, and other out-of-pocket costs to wages, which means that high earners pay more for their coverage. In 2021, 40% of large employers offered some sort of wage-based cost-sharing, according to the Business Group on Health. And while the survey didn’t ask employers about their plans for 2022, that number is likely to grow.

Penalty for the Unvaccinated?

While this year’s open-enrollment period won’t have a “yes or no” box to verify your vaccination status (like the “Are you a smoker?” question that’s typically asked), it could become a reality for the 2023 open-enrollment season. And some employers are already penalizing unvaccinated employees. In late August, Delta, one of the largest global airlines, announced that it will require unvaccinated employees to pay a $200 monthly health insurance surcharge. Delta CEO Ed Bastian said in a memo to employees that the surcharge was designed to address “the financial risk the decision to not vaccinate is creating for our company.”

Some health insurance companies are looking into whether individuals who had COVID-19 are more prone to develop health problems that will increase the cost of care, says Patricia Graves, employee benefits expert with the Society of Human Resource Management. If that data shows that the COVID-19 vaccine limited health care costs, more employers may add a premium surcharge for unvaccinated employees, similar to the smoker’s surcharge, she says.

Insurers can’t deny you coverage because you had (or have) COVID-19, but surcharges are legal as long as you are offered an alternative to paying the surcharge. For smokers, the alternative is to complete a program that helps them kick the habit. In the case of COVID-19, the alternative would be to get vaccinated.

COMPARE EMPLOYER PLANS

For most people with employer-provided coverage, high-deductible health care plans will still be the name of the game. Consumers can expect to be offered one or two high-deductible plans and possibly a preferred provider organization (PPO) plan or a health maintenance organization (HMO) plan, says Mark Hope, employee benefits expert with Willis Towers Watson, a global human resources consultant. An HMO plan typically provides little or no coverage for out-of-network care. You may also need a referral from your primary care doctor to get coverage for specialist visits.

If you’re a relatively healthy individual who only needs coverage for yourself or for you and your spouse, a high-deductible health plan is probably your least expensive option. The premiums tend to be lower than those for a traditional PPO or HMO plan. To help offset the costs of meeting a deductible, high-deductible plans typically come with a health savings account (HSA) that your employer may contribute to. Contributions are pretax (or tax-deductible for HSAs that aren’t employer-sponsored), money in the account grows tax-deferred, and withdrawals are tax-free for qualified medical expenses.

To qualify for an HSA, your 2022 plan must have a minimum deductible of $1,400 for self-only coverage or $2,800 for family coverage (the same minimums apply to 2021 plans). Before you sign up for this lower-premium plan, make sure you understand how the deductibles work, whether you have coinsurance or co-payments and whether the coinsurance or co-payments count toward your deductible.

Co-payments are typically fixed costs tied to a specific service—say, $25 each time you see your primary care doctor or $40 when you see a specialist. Coinsurance works on a percentage basis. You may, for example, be responsible for 10% or 20% of the total cost of the service provided, with your insurance provider picking up the rest.

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