Health Insurance Open Enrollment: How to Choose the Right Plan

insurance 2026-02-27 · 5 min read health insurance open enrollment deductible HSA ACA marketplace HMO vs PPO

Open enrollment is the one time each year when you can change your health insurance. For employer-sponsored plans, it usually happens in the fall (October-December). For ACA marketplace plans, it runs November 1 through January 15. Get it right — your choice locks in for the next 12 months.

Understanding the Key Terms

Premium: The monthly cost of having insurance, paid regardless of whether you use healthcare. A high-premium plan costs more per month but often means lower out-of-pocket costs when you do get care.

Deductible: What you pay before insurance kicks in. With a $3,000 deductible, you pay the first $3,000 of medical costs yourself each year. After that, insurance starts sharing the cost.

Co-pay: A fixed amount you pay for specific services (a doctor visit, prescription). For example, "$30 copay for primary care visits."

Coinsurance: After your deductible, you often still share costs — coinsurance is your percentage. With 20% coinsurance, you pay 20% of costs and insurance pays 80%.

Out-of-pocket maximum: The most you'll pay in a year. Once you hit this limit, insurance covers 100% of covered services. Federal law caps this at around $9,450 for individual plans in 2026.

Network: The doctors, hospitals, and providers who have contracted with your insurance company. Using in-network providers is dramatically cheaper than out-of-network.

HMO vs PPO vs EPO vs HDHP

HMO (Health Maintenance Organization):

Requires a primary care physician (PCP) who coordinates your care
Need referrals to see specialists
Out-of-network care almost never covered (except emergencies)
Lower premiums, less flexibility
Good for: people who primarily use one healthcare system, don't travel much, want simplicity

PPO (Preferred Provider Organization):

No PCP requirement, see any doctor directly
Can see specialists without referrals
Out-of-network care covered (at higher cost)
Higher premiums, more flexibility
Good for: people managing chronic conditions with multiple specialists, frequent travelers, those who value flexibility

EPO (Exclusive Provider Organization):

Like an HMO but without the PCP/referral requirement
Strictly in-network (no out-of-network coverage except emergencies)
Middle ground: flexibility of PPO within network, cost of HMO
Good for: people comfortable staying in-network who want flexibility

HDHP (High-Deductible Health Plan):

High deductible ($1,600+ for individual plans in 2026)
Lower monthly premiums
The key benefit: pairs with a Health Savings Account (HSA)
Good for: healthy people who rarely use healthcare, people who want to maximize the HSA tax advantage

The HSA Advantage: Why HDHPs Can Win

An HSA (Health Savings Account) is only available if you have an HDHP. The HSA is triple tax-advantaged:

Contributions are pre-tax (reduces taxable income)
Earnings grow tax-free
Withdrawals for medical expenses are tax-free

2026 contribution limits: $4,300 for individuals, $8,550 for families.

Unused HSA funds roll over year to year — there's no "use it or lose it" like with FSAs. Many people build up large HSA balances and use them as a stealth retirement account (after age 65, withdrawals for any purpose are taxable as ordinary income — same as a traditional IRA).

When HDHP + HSA makes financial sense: Add up the premium difference between a high-deductible plan and a traditional plan over the year. If you're healthy and don't expect major medical bills, the premium savings often exceed the higher deductible. And the HSA tax savings are real money.

When HDHP doesn't make sense: If you're managing a chronic condition, pregnant, expecting surgery, or regularly use significant healthcare, the math often favors a lower-deductible plan.

How to Compare Plans: A Practical Framework

Step 1: Estimate your likely healthcare usage.

Low usage (maybe 1-2 primary care visits/year, healthy): Lean toward lower premiums, higher deductible
Moderate usage (managing a condition, regular specialist visits): Look for lower deductible, good formulary for your medications
High usage (major medical issues, surgery expected, pregnancy): Prioritize low out-of-pocket maximum and comprehensive coverage

Step 2: Check your medications. Every plan has a "formulary" — the list of covered drugs and their tiers. Tier 1 (generic) is cheapest. Tier 3-4 (brand-name, specialty) can be very expensive. Look up your specific medications on each plan you're considering.

Step 3: Check your doctors. If you have doctors you want to keep, verify they're in-network for each plan. This can be decisive — being forced to switch your primary care physician or a specialist you rely on has real costs beyond money.

Step 4: Calculate total annual cost, not just premiums. For each plan, estimate: (monthly premium × 12) + expected out-of-pocket costs.

For a healthy person:

Plan A: $200/month premium ($2,400/year) + $500 expected out-of-pocket = $2,900 total
Plan B: $400/month premium ($4,800/year) + $200 expected out-of-pocket = $5,000 total
Plan A wins even though it has a higher deductible

For someone expecting a baby:

Run the same math but model out-of-pocket at or near the out-of-pocket maximum

Step 5: Consider the worst case. Even if you're healthy, look at each plan's out-of-pocket maximum. If a car accident or unexpected diagnosis happens, what's the most you'd owe? Pick a plan where the worst-case scenario is survivable.

ACA Marketplace Plans: Premium Subsidies

If you're buying insurance through the ACA marketplace (Healthcare.gov or your state exchange), you may qualify for premium tax credits.

Income thresholds: Subsidies are available for households earning up to 400% of the Federal Poverty Level. For 2026:

Individual: up to ~$60,000
Family of 4: up to ~$124,000

The subsidy cap: Under the ARP (extended through 2025), no one should pay more than 8.5% of household income on marketplace premiums. If you're earning $50,000, your cap is $4,250/year in premiums.

Lower-income subsidies: If your income is under 250% of FPL, you may also qualify for Cost-Sharing Reductions (CSRs) that lower deductibles and out-of-pocket maximums — but only on Silver plans.

Use HealthCare.gov's estimator tools to see your specific subsidy amount before choosing a plan.

Special Enrollment Periods

If you miss open enrollment, you can generally only enroll if you have a qualifying life event:

Losing employer health coverage (job loss, reduction in hours)
Getting married or divorced
Having a baby or adopting
Turning 26 (aging off a parent's plan)
Moving to a new coverage area
Gaining citizenship or lawful presence

You typically have 60 days from the qualifying event to enroll. Document everything — you'll need to provide proof of the qualifying event.

Common Mistakes During Open Enrollment

Defaulting to your current plan without reviewing: Plans change every year — premiums, deductibles, formularies, and networks all shift. Review your options fresh every year even if you're happy with your current plan.

Choosing solely on premium: The cheapest premium often means the highest deductible and out-of-pocket costs. Always calculate total annual cost.

Forgetting to check medications: A plan that covers your condition but not your preferred medication isn't truly comprehensive for you.

Ignoring the HSA opportunity: If you're relatively healthy and your employer offers an HDHP with HSA, running the numbers often reveals significant tax savings are being left on the table.

Open enrollment is one of the most important financial decisions of the year. Give it an hour or two of serious analysis — the choice affects both your finances and access to healthcare for the next 12 months.