By Paul Breslau
Open enrollment is the time of year when businesses and people can change their health insurance plan for any reason. January 1 is the predominate effective date for any changes and the fourth quarter is the time when most people make decisions.
Open enrollment periods differ somewhat by type of health insurance and this article briefly examines a few of the market segments. Each year premium rate increases combine with reductions in benefits and make the decision-making process more difficult.
Employers and employees
Human resource decision makers at businesses of all sizes as well as at nonprofits and governments review plans and make decisions on what to offer employees for the upcoming year. The larger the employer the earlier their review process. The many variables are matched by the fierce competition of agents and brokers and the insurance companies they represent. One example is that for a small business there are now level-funded plans, which can replace fully insured plans for significant savings in certain situations.
In the fourth quarter, employees are given up to a two-week period to enroll, add dependents, or change plans. Larger businesses in the past have run open enrollment meetings. Over the years these meetings have gradually moved online. This class of software is called human capital management or HCM. COVID-19 will increase the pace of this change. The HCM software integrates hiring, payroll, benefits, 401k, time keeping, etc. into one unified system. HCM systems both reduce hard-dollar costs and also reduce the amount of time for open enrollment and all other HR functions.
Individuals and families
Each January 1, the Affordable Care Act or ACA allows individuals and families to enroll into health insurance plans for the first time without a qualifying event. People can also make plan changes or add dependents. Alternative options to the ACA do not have open enrollment restrictions and these include cost-sharing plans and tri-term medical plans.
Factors impacting the decision process include family income which many times allows a large Affordable Care Act premium subsidy. Another factor is family health given that the low-cost tri-term medical plans are medically underwritten. tri-term and cost sharing have preexisting condition limitations. There are significant premium and coverage differences between these various options
Seniors and Medicare
I joke when people reach age 65 that they are “home free” in terms of health insurance. Medicare usually provides significantly more benefits at a much lower cost than their prior health insurance. A person’s coverage begins on the first day of his or her 65th birthday month.
Each year any senior can change their Medicare plan for any reason. This open enrollment is called the AEP or annual election period and runs from October 15 to December 7. Any change will be effective on January 1. There is much competition between the various insurance companies. On the legacy Medicare supplement side there are standardized plans where benefits are the same. On the growing Medicare Advantage side there is an amazing and confusing array of plans, options, provider networks, and premiums, some with zero upfront cost. The best plan for a person may change over time.
In my opinion there is a probability that small businesses will continue to be challenged with changes. For example, if Medicare is expanded the owners of these enterprises will no longer need business-based health plans. The remaining employees will use combinations of the individual market, cost sharing, tri-term, Medicare, Medicaid, etc. Also, more small businesses will utilize human capital management systems to save time and money.
I am now partnering with leading local experts in all lines of insurance and business services. Reach out to me at 602-692-6832 or Paul@HRaz.com for an initial conversation, evaluation, or referral.
Paul Breslau—registered health underwriter (RHU), registered employee benefit consultant (REBC), chartered life underwriter (CLU), chartered financial consultant (ChFC), chartered adviser for senior living (CASL)—is president of Breslau Insurance & Benefits Inc.