About 80-90% of American companies and small businesses renew their insurance policies for health insurance on January 1 for the 2026 plan year. You’ll be presented with information from your employer to evaluate your choices, and this is a good time to share some insights on decision-making as you go into this next cycle.
Tune into the CLEARly Beneficial podcast with your host, Vinny Catalano, and guest, Judith Kunisch. Listen on Buzzsprout, Substack, YouTube or any of your favorite podcast channels.
The 9-Minute Problem
First of all, the days of the open enrollment meeting are kind of over. Some small group brokers still show up and do an open enrollment meeting for small business, but for the most part, open enrollment meetings are, at best, virtual, and at worst, your HR team shoots you a PDF and says, here, read this.
According to the MetLife study, and this has been a consistent thing for many, many years, employees take 9 minutes to evaluate or even read the 75-page PDF that they’re given to look at during open enrollment. You’re making decisions now for all of your things in 2026, and it probably is worthwhile for you to dig in a little deeper to make some positive and good decisions. This year in particular.
Why Rates Are Skyrocketing
Health insurance rates have gone up double digits. Employers are making decisions about whether to pass some of that cost increase on to employees, eat it themselves, or somehow share it. They’re struggling with this, because in some cases, increases have been in the high double digits—15, 20%, sometimes even more. Single-digit increases are rare, because hospital systems costs are going up and insurance companies are keeping their margins healthy.
And who gets caught with this? Employees.
One of the interesting things that drives the cost of health insurance is the fact that hospital systems have this thing called payer mix. Coming into the door of a hospital, you have people who pay different levels for the same procedures. You have someone coming in that may have Medicaid or Medi-Cal in California, Medicare for people over 65, commercial pay, and then people who don’t have insurance at all—charity care.
But when you look at the amount that gets billed from a hospital for those services, Medicaid and Medi-Cal pay the least. Medicare pays the next least, but commercial payers pay the most. So, the brunt of cost increases that hospitals need to fund generally gets put on employers through the insurance that employers pay.
Over the last 20-plus years, employer costs have gone up an average of 9% a year. This is going to be one of those outlier years where things are going to go up higher.
Making Your Decision: What You Need to Know
So, what can you do as an individual when you’re faced with your open enrollment materials? How do you make a decision? Do you stick with what you had this year? Do you look at the changes? You gotta be careful about how these changes are being presented to you. There could be changes in your coverage—the co-pays might go up, the deductibles might go up. You might be faced with the fact that the plan you had last year is no longer available.
You have to take a look at what the choices are and how those things will meet your needs and your family’s needs.
The Most Important Number: Out-of-Pocket Maximum
There’s a couple of basics that you really need to understand. The most important number in the health plan is this thing called the maximum out-of-pocket or out-of-pocket maximum, however you want to phrase it. This is the number that, if you were in a catastrophic situation, you and your family would pay, and once you’ve met that number, the insurance company pays for your coverage 100% for the rest of the year.
Now, most of us will never hit that number. Especially if you have nothing going on and you’re reasonably healthy, which describes 85% of the population, you’re never going to see the maximum out of pocket. I think in my lifetime, me and my family have only hit that number one time. But it’s still an important number, because it can cost you to the point of thousands and thousands of dollars.
A typical large group (if you work for a large employer—depending on the state, it could be 50 or more employees, or 100 or more employees in California) could have an out-of-pocket maximum for a single person of $4,000, or for a family of $8,000.
But if you’re in a small group plan for small business, those plans generally have higher out-of-pocket maximums—on the order of $7,000-$8,000 for a single, and twice that for a family. You could be facing an annual out-of-pocket maximum of $14,000-$16,000, which is very high.
Add that out-of-pocket maximum to the amount of money coming out of your paycheck for your insurance, and that is your total cost of ownership for the year, potentially, in a worst-case scenario.
That is probably one of the most key factors you have to consider. Everything else under that—the copay, the deductible, the coinsurance—all those things lead up to ultimately hitting that out-of-pocket maximum number.
High-Deductible Plans and HSAs: A Smart Strategy
You have to decide what’s most important to you. Is it important to you to pay 40 bucks when you go see a doctor, or is it important for you to pay less for insurance? Because when you take a plan that has a regular copay and a low deductible, you will pay more for insurance than the people who basically say, okay, I’m gonna take a consumer-directed, high-deductible plan and pay less for insurance.
What they normally do, which is a great strategy, is pocket the difference between what you would have paid for a rich plan and what you’re gonna pay for a consumer-directed plan, and put that in a health savings account.
A lot of people just say, okay, I’m just gonna save the money. But the most important thing that someone can do when entering a high-deductible plan is participate in the HSA. In some cases, your employer will contribute something to your HSA, and then it’s up to you to put in the max. For a family in 2025, the number was $8,550 you can put into an HSA, and $9,550 if you’re over 50 or 55 years old, as a catch-up contribution.
It is an interesting vehicle for putting money away:
- The money goes in tax-deductible
- It’s your money, whether your employer puts it in or you put it in
- There’s no use-it-or-lose-it function
- Depending on the HSA administrator (a brokerage account, for example), you can invest that money in mutual funds, exchange-traded funds, money markets, anything
- When the money comes out for eligible healthcare expenses, or when you turn 65 to pay for Medicare, parts of Medicare, or long-term care, that money comes out tax-free
The health savings account is one of the few vehicles that benefits you tax-free going in and tax-free going out.
A smart strategy is to treat the HSA as an investment account. For doctor visits or pharmacy prescriptions, use a credit card to pay for those out-of-pocket expenses. The HSA is for a long-term strategy—that money just sits there growing.
HMO vs. PPO: Understanding Your Options
Look at your total cost of ownership, look at the type of plan that you want to be in. A lot of you will get the choice of being offered an HMO, which is a narrow, focused plan. You have a narrow focus of doctors, you have a primary care physician that acts as your gatekeeper to refer you to other specialists in your network. Those plans tend to be a little more restrictive from a network perspective.
PPO plans, because of the fact that you now have the flexibility to go see the doctors that you choose, tend to be a little more expensive. Especially when you’re considering the same level of benefit. If you have a plan with a $40 copay, a $1,000 deductible, HMO versus PPO, that PPO will tend to be more expensive.
One of the things that’s a bit of a misnomer is that, oh yeah, I can go to any doctor I want with a PPO. Well, that’s true, but there’s in-network docs, and there’s out-of-network docs. When you go to an out-of-network doc, the PPO almost operates as if it has a parallel health plan. The out-of-network component of it has a separate deductible, a separate out-of-pocket maximum, then the in-network PPO.
It’s something to keep your eye on, but it also gives you, at the end of the day, if you want all that flexibility, if you feel that eventually you might want to go to the Mayo Clinic for something, having a PPO is definitely something to consider.
Matching Your Plan to Your Needs
You should think about what’s going on with you and your family when it comes down to the choice. Are you all healthy? If you’re all healthy, then being in a high-deductible plan coupled to an HSA makes sense. If you’ve got a lot going on, it probably makes sense to take a look at what your total cost of ownership could be, again, premium and deductible, if you’re anticipating a surgery, a pregnancy, any of those things in 2026.
When Your Employer Switches Insurance Companies
One thing to make sure you’re aware of: if there’s some change in your plan, your employer said, okay, well, we’re switching from X insurance company to Y insurance company, things are gonna change. The doctor network might change a bit. The pharmacy formulary might change a bit. And that’s super important, because if you’re on a brand name drug in particular with insurance company X, that same drug may not be available in insurance company Y.
A good rule of thumb is to make sure you fill that prescription for the drugs you’re taking on the brand name right now, today, before the end of the year, so you have at least a 90-day supply going into 2026. And then talk to your doctor about what is a better drug to switch to.
Shop Around for Prescriptions
Drugs are an interesting case. For common medications like blood pressure and cholesterol drugs, costs through employer health plans via mail order or for a 90-day supply can be very high relative to other options. Mark Cuban’s Cost Plus Drugs, for example, can be one-third or less of the cost of these generic drugs versus what you’d pay through CVS on a typical health plan.
Be a good comparison shopper. Think about the options you have.
Important Checklist Items
- Check your drug formulary
- Make sure the providers that you have are in the network if there are any changes
- Understand the total cost is super important
- Make sure that the family members you have on the plan are the ones you want on the plan (and no, you cannot put your grandmother on the plan. You cannot put your cousins on the plan. This is for you and your immediate family)
The Dual-Coverage Question
This opens up a whole other interesting conversation about two spouses who both have employers, both have separate employer health plans. A lot of thought goes into, I’ll stay on my plan, you stay on your plan, we’ll put the kids over here.
It makes sense to do an analysis on both plans—what the out-of-pocket monthly premium costs would be to put the whole family on one plan. Why I say this is that, say one spouse works for a large company with a low annual out-of-pocket maximum, and the other spouse works for a small group that has small group plans. The person on the small group plans would probably have a higher out-of-pocket maximum than the family plan.
When you look at how these plans are structured, I hate to use this term, but it’s kind of like the car crash scenario. Family—husband, wife, two kids—get into a car crash. Husband is on his plan, kids are on his plan, spouse wife happens to be on the other plan. So, what does that mean? Well, three of the people will be covered by one insurance, the other one will be covered by another. That means you’re building up separate deductible costs, you’re building up separate out-of-pocket maximums, and therefore, it could overall cost the family a lot more in out-of-pocket costs to have both spouses on their own respective different plans.
It really makes sense to do a little bit of a deep dive and understand the total cost of being on one plan together versus on separate plans, not just from a premium point of view—what’s the least coming out of my paycheck—but in the bigger picture, taking a look at co-pays, insurance, and out-of-pocket maximums and deductibles, because that becomes part of the total cost of ownership.
Don’t Forget: New Dependents
Make sure you’re adding or dropping the right dependents. Many people don’t pay attention to this, but if you have a baby, make sure that child gets added to the plan within the first 30 days, not the 31st day. Insurance companies are strict about that detail.
Beyond Medical: Other Important Benefits
Open enrollment includes far more than medical insurance. HR will send you a comprehensive document (often 75+ pages) covering all the disclosures and plan outlines for dental insurance, vision insurance, long-term disability insurance, short-term disability insurance, and all the supplemental benefits. Some employers are even offering pet insurance now.
Life Insurance: The Easy Win
Many people overlook these additional benefits. Here’s what matters: life insurance—buying supplemental life insurance through your employer is the least costly way to bolster coverage for you and your family. Your employer’s insurance company may have a guaranteed issue of a couple hundred thousand dollars available at very low cost for you and your spouse. It’s the cheapest option because there are no health questions under the guarantee issue number.
Long-Term Disability: Protect Your Paycheck
The second most important insurance next to medical that you are offered (if your employer offers it, and if they don’t, you should ask them to offer it) is long-term disability, or I like to call it income protection insurance. Income protection insurance is all about protecting your paycheck if, for whatever reason, you’re disabled.
A lot of employers pay for it on your behalf, and you don’t even know it’s there. But a lot of employers may offer it to you on a voluntary basis, which means you could buy it yourself.
This is the thing that is amazing about long-term disability insurance. Let’s say you’re bringing home $6,000 a month. Long-term disability insurance will cover you up to 60% of that per month, and if the premiums are taxed, that means you get a tax-free benefit until your normal retirement age. So basically, if you become fully disabled, you can get a tax-free paycheck up until age 65 or 67 or beyond.
Long-term disability insurance is something you should pay attention to. It’s super important. If your employer is paying for it, amazing, give them a hug. If they’re not paying for it, and they offer it to you as a voluntary insurance product, you should consider it, because it’s probably the least costly, highest level of protection you would have in case something bad goes wrong. You’re more likely to become disabled than you are to die.
Take Your Time and Think Long-Term
Make your choices on time—don’t be the person your employer has to chase down. Many of you will just log into a link, click through quickly, and in many cases, your employer will do a passive enrollment. If they haven’t made any changes to the plans except the rates, they’ll ask: do you want the same thing next year?
Take a minute, take a breath. Look at the details. Consider whether you want a plan that costs more or less out of your paycheck. This is where the HSA decision becomes critical.
A Message for Younger Workers: The HSA Advantage
If you’re Gen Z or a millennial, your 60-year-old self will thank you for funding that HSA for 25-30 years. Here’s the math: if you’re probably healthy and won’t use the HSA much during those years, you’ll be sitting there at age 60 with $200,000 in your HSA—tax-free money available to pay for healthcare in your long-term retirement and beyond.
This is why the HSA coupled with a high-deductible health plan is an incredibly smart strategy, especially for younger, healthier workers. You’re not just saving for next year’s healthcare costs—you’re building a tax-advantaged retirement account that will be there when you need it most.
About CLEAR Healthcare Solutions
CLEAR Healthcare Solutions is a consulting firm specializing in medical practice improvement, employee benefit strategy, point solution go-to-market strategy, expense reduction, and healthcare and insurance education. The company leverages over two decades of industry relationships and expertise to bring fresh perspectives to healthcare and business challenges.
About The CLEARly Beneficial Podcast
The CLEARly Beneficial podcast rips off the band-aid on healthcare and explores the future of benefits with industry innovators. Whether you’re an insurance broker, HR professional, employer, or engaged professional, the podcast delivers straight talk and actionable insights from someone with decades in the trenches. The show takes a solution-oriented approach, featuring conversations with healthcare CEOs, authors, innovators, and leaders driving positive change across industries.
New episodes are released weekly on all major podcast platforms.
For more information, visit www.clearhcs.com or connect with Vinny Catalano on LinkedIn at www.linkedin.com/in/vcatalano.
Disclaimer: This content is for educational purposes only. Please discuss your specific situation with your health benefits administrator or insurance provider for personalized guidance.