December 24, 2024

Personal Finance Tips for 2024: Health Insurance

About 165 million Americans receive health insurance through their job, but most don’t spend much time considering the benefits offered by their employer or how much it costs.

In fact, employees only spent approx. 45 minutes a yearA report from Aon found that, on average, they decide which benefit options are best for them.

open admissions seasonTypically lasting until early December, it’s an opportunity to take a closer look at the stakes.

First, costs are rising significantly.

Rising costs

Health care costs have been rising steadily for years. Recently, there has been a noticeable jump.

For employers, these cost increases have reached Post-pandemic highsThat’s according to consulting firm WTW (formerly Willis Towers Watson). The company said U.S. employers expect their health care costs to increase 7.7% in 2025, compared with 6.9% in 2024 and 6.5% in 2023.

WTW found that employers are considering new ways to adapt their program offerings as costs rise.

So far, 52% of companies say they plan to implement programs to reduce overall costs, and similarly many intend to shift to lower-cost providers and care locations, which could mean a narrower network of doctors to choose from.

Currently, the average employer subsidizes about 81% of health care plan costs, while employees pay the rest, according to professional services firms Aon.

However, some higher costs will inevitably be passed on to employees.

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The WTW report found that about one-third, or 34%, of employers hope to pass on some of the cost to employees by raising premiums or increasing deductibles on high-deductible health plans in the coming year.

Costs per employee are expected to rise an average of 5.8% through 2025, marking the third consecutive year of increases in health benefit costs More than 5%According to another report from Mercer Consulting, the average over the decade was only about 3%.

“Employees are going to feel these changes,” said Beth Umland, director of health and benefits research at Mercer.

Health care costs are already high for workers: Family premiums for employer-sponsored health insurance rose 7% this year to an average of $25,572, KFF 2024 Benchmark Employer Health Survey established. More than $6,200 of that amount is borne by the worker, with the remainder borne by the employer.

“As costs rise to reach post-pandemic highs, companies are concerned about the burden this places on employees, particularly as it impacts decisions about insurance coverage and care,” Tim Stawicki, chief actuary for health and benefits at WTW, said in a statement.

Consider your health care costs

Typically, employees are faced with the choice of a health insurance plan: one with a higher monthly cost (called the premium) or one with a lower deductible (the amount you have to pay before your employer’s plan takes effect). The alternative is to have higher out-of-pocket costs but lower premiums.

“Most of the time, when you do open enrollment, the first thing you see is the deductible and out-of-pocket costs,” said Regina Ihrke, WTW’s North America director of health, equity and well-being.

Gary Kushner, chairman and president of benefits design and management firm Kushner & Company, recommends using previous years as a guide when weighing your options.

He says you should consider: “Am I a low-claim, medium-claim, or high-claim household? Have I had an incident that required emergency care or basically required a lot of preventive care?”

If you only see your doctor regularly, such as once a year for checkups, you might choose a so-called high-deductible plan with a lower monthly cost.

health savings account

In addition to high-deductible health insurance plans, more than 50% of employers offer health savings accountor HSA, which can help pay for additional medical expenses.

In order to be able to use an HSA, you must have a qualified high-deductible health plan. The IRS defines “high deductible” as at least $1,650 for individual coverage and $3,300 for family coverage in 2025.

The IRS also determines the maximum contributions allowed each year: HSA contribution limits Individual contributions will increase from $4,150 in 2024 to $4,300 in 2025, and family contributions will increase from $8,300 in 2024 to $8,550. Supplementary payment.

HSA contributions then grow on a tax-free basis, and the funds can cover out-of-pocket expenses, including doctor’s visits and prescription drugs, including expensive weight-loss drugs.

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

“Make sure you’re thinking about how to put some money into a savings account so you can use it to pay your doctor’s bills or save for the next few years,” Ilk explains.

Life and disability insurance

During open enrollment, employees may also have access to different disability and life insurance options, which are often included in standard benefit plans.

An employer-issued life insurance policy is typically equivalent 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’s optional coverage that you can add to your employer’s basic group policy.

There are two basic types of disability insurance: Short-term disability usually replaces 60% to 70% of your base salary, and the premiums are usually paid by your employer. Long-term disability usually begins after three to six months and typically replaces 40% to 60% of your income.

Even if you obtain these policies through work, this may be only a small part of what you need to protect young children or other dependents.

Consider what amount is right for you and your family, and then weigh whether to purchase additional or supplemental coverage through a workplace group plan or purchase your own coverage policy, a move recommended by many consultants.

Take advantage of voluntary benefits

Today, additional benefits may be optional but are equally important, especially when it comes to well-being. Nearly one in five employees reported worsening mental health during open enrollment, according to a recent report gallagher.

Tom Kelly, leader of Gallagher’s health and benefits practice, said: “More than ever, we are seeing employers looking to meet the needs of their expanding workforce, and today’s employees are looking for more comprehensive benefits support. “

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