A Complete Analysis of the Open Rising Healthcare Costs and the Need for Open Enrollment

Healthcare costs have risen dramatically over time. In 1960, the average yearly expense of healthcare was $150 per person. Today, it's closer to $13,000 per person—and still rising. To limit liability and maintain a healthy insurance pool, insurance companies introduced open enrollment periods. Without these, people might only buy insurance when they become ill.

What is Open Enrollment?

Each year during open enrollment, workers—especially those in small businesses—are given the chance to renew, change, or sign up for group health insurance for the upcoming year. Employers are responsible for providing all necessary information about the health insurance plans they offer, including any changes, available options, and associated costs. Employees then review their options, ask questions, and make coverage decisions. EDI managed services and EDI 834 services play a crucial role in ensuring this data exchange is seamless, secure, and timely between employers, insurers, and other benefits administrators.

Technologies in EDI, such as the 834 file format, streamline enrollment and eligibility updates. EDI 834 services help enterprises update data, modify coverage, and share enrollment status efficiently across connected systems, simplifying administration and ensuring accuracy.

Types of Open Enrollment

1. Active Open Enrollment

Employees must actively complete the enrollment process annually, selecting or declining all available benefits. Employers introducing new benefits or making plan modifications should use active enrollment.

Benefits of Active Enrollment:

• Employees revisit and adapt their benefits to current circumstances.
  
  

• Employers can educate staff about new options and plan changes.
  
  

• Opportunities to update personal data, beneficiaries, and dependents.
  
  

• Increased likelihood of employees selecting voluntary benefits.
  
  

• Helps discontinue unnecessary perks and switch to better-suited ones.
  
  

• Ensures ineligible benefits (like certain FSAs) are not carried over.
  
  

Drawbacks:

• More demanding for HR and benefits teams.
  
  

• Risk of employees missing the deadline and losing coverage.
  
  

2. Passive Open Enrollment

Also known as auto-enrollment, this method automatically enrolls employees into their current or equivalent plans. It minimizes the risk of coverage lapses due to non-participation.

Pros of Passive Enrollment:

• Easier for both employers and employees.
  
  

• Simplifies the process with “re-selecting” options.
  
  

• Prevents loss of insurance due to inactivity.
  
  

• Saves time for all parties.
  
  

Cons:

• Vital employee or benefit data may become outdated.
  
  

• Changes in plans or new offerings may go unnoticed.
  
  

• Less engagement and reevaluation of benefits by employees.
  
  

What is Included in Open Enrollment?

Many Americans spend less than an hour evaluating their health coverage—yet nearly 90% select the same plan they had the previous year. During open enrollment, individuals can:

• Choose health, dental, and vision insurance
  
  

• Enroll in tax-advantaged accounts like FSAs and HSAs
  
  

• Review and update coverage for life insurance, disability, and more
  
  

Health Insurance Options

• Preferred Provider Organization (PPO): Offers discounted rates for in-network care while still covering out-of-network providers.
  
  

• Traditional Health Plans: Higher premiums, lower deductibles, and full preventive care coverage.
  
  

• High-Deductible Health Plan (HDHP): Pairs with an HSA to lower costs and offer tax advantages.
  
  

• Health Maintenance Organization (HMO): Smaller provider networks with lower premiums and deductibles.
  
  

Dental and Vision Coverage

Employees can select from various plans offering different levels of coverage and provider networks. Vision plans may include allowances for glasses or contacts.

Tax-Advantaged Accounts

Health Savings Account (HSA)

• Must be paired with an HDHP
  
  

• Contributions are tax-free and portable
  
  

• Annual contribution limits set by the IRS
  
  

Flexible Spending Account (FSA)

• Can be used with any health plan
  
  

• Funded via pre-tax paycheck deductions
  
  

• Types include:
  
  

• FSA for Healthcare
  
  

• FSA for Dependent Care
  
  

• Specialized FSA
  
  

Disability Insurance

• Short-Term and Long-Term Disability Insurance
  
  

• Critical Illness and Supplemental Policies: Pay out upon diagnosis of covered illnesses
  
  

• Workers’ Compensation: Covers on-the-job injuries or occupational illness
  
  

• Long-Term Care Insurance: For chronic illness or disability outside a hospital setting
  
  

Life Insurance Options

• Group-Term Life Insurance: Most commonly offered through employer benefits
  
  

• Group Accidental Death and Dismemberment (AD&D): Pays out for death or limb loss due to accidents
  
  

• Business Trip Accident Insurance
  
  

• Split-Dollar Life Insurance: Benefits both employee and employer
  
  

Mental Health Benefits

A growing number of employees want better mental health support. Common benefits include:

• Telemedicine, Apps, and Online Treatment Programs
  
  

• Employee Assistance Programs (EAPs): Include counseling, legal services, eldercare, childcare support, and more
  
  

Voluntary and Chosen Benefits

Voluntary benefits are offered at group rates but often paid partially or wholly by the employee. These may include:

• EAPs
  
  

• Wellness Programs
  
  

• Financial Planning Services
  
  

• Pet Insurance
  
  

• Travel Accident Insurance
  
  

• Flexible Work Options
  
  

Retirement Benefits

Often overlooked during open enrollment, retirement benefits are still crucial. Employees should be reminded to:

• Enroll or contribute to 401(k) plans
  
  

• Maximize pre-tax contributions
  
  

• Make catch-up contributions (if over 50)
  
  

Benefits of Registering for Benefits

For Employers

• Recruitment & Retention: Competitive benefits attract and keep talent
  
  

• Morale & Engagement: Increases job satisfaction
  
  

• Health & Productivity: Healthier employees take fewer sick days
  
  

• Tax Advantages: Contributions to accounts like HSAs benefit both employer and employee
  
  

• Regulatory Compliance: Meeting legal obligations
  
  

• Competitive Advantage: Sets the organization apart
  
  

For Employees

• Health Coverage: Helps manage medical expenses
  
  

• Financial Security: Includes retirement, life, and disability insurance
  
  

• Work-Life Balance: Includes time off, family leave, and flexible scheduling
  
  

• Career Development: Access to educational support and training
  
  

• Tax Savings: From accounts like FSAs and HSAs
  
  

• Mental Health Support: Through programs like EAPs
  
  

• Personalization: Customizing benefits to fit individual needs
  
  

How to Select a Platform for Employee Benefits Enrollment

Key Factors to Consider

• Recognize Organizational Needs
  
  

• Ease of Use: For both admins and employees
  
  

• Integration with HR Systems
  
  

• Customization Options: For different employee needs
  
  

• Mobile Accessibility
  
  

• Effective Communication Features: Email, alerts, reminders
  
  

• Decision Support Tools: Calculators, guides, educational materials
  
  

• Compliance and Data Security
  
  

• Analytics and Reporting Features
  
  

• Scalability
  
  

• Vendor Reputation and Support
  
  

• Cost and ROI Consideration
  
  

• Training and Assistance Availability
  
  

• Feedback Mechanisms
  
  

Conclusion

Open enrollment season can be overwhelming, especially for HR professionals. However, year-round planning—such as engaging with plan administrators, surveying employees, and improving communication—can ease the process.

Unless there’s a qualifying life event, open enrollment may be the only time to enroll in or change a health plan. For those who miss it, alternatives like short-term health plans or healthcare-sharing ministries can offer temporary solutions. Medicaid and CHIP also remain open year-round for eligible individuals.