The average American spends fewer than 20 minutes selecting their health insurance plan during open enrollment.
Open enrollment only comes once a year. And most people spend less time choosing their health insurance plan than they spend choosing a restaurant.
That's not an exaggeration. The average American spends fewer than 20 minutes selecting their health insurance plan during open enrollment, often defaulting to whatever they had last year, or simply choosing the option with the lowest monthly premium. Sorting through your options can feel overwhelming. However, time spent during open enrollment can help you prepare for the coming year.
The health insurance decisions made during open enrollment affect your healthcare costs, your out-of-pocket exposure, your tax strategy, and your financial plan for the entire year ahead. A plan that costs $200 less per month but carries a $3,000 higher deductible isn't always a cheaper plan. It's actually a bet that you won't need significant healthcare next year. Sometimes that bet pays off. Sometimes it doesn't. You just never know.
For military families navigating the transition from TRICARE to civilian health coverage, and for business owners purchasing coverage independently through the ACA Marketplace or an association plan, the decision may be particularly complex. TRICARE comes with fewer plan options (Prime or Select) and functions a bit differently than many civilian health care plans. Business owner health insurance has specific tax implications that interact with the rest of your financial plan. But in the end, the framework for making a good decision is the same regardless of which situation you're in: understand your options, model your true costs, and make a deliberate choice rather than a default one.
Here's how to do that.
Understanding the Plan Types
Before comparing specific plans, it's worth understanding what distinguishes the main plan types. The category of plan often matters as much as the specific costs.
HMO — Health Maintenance Organization
HMOs typically offer the lowest premiums of any plan type. In exchange, they require you to select a primary care physician who coordinates your care, and you generally need a referral to see a specialist. Coverage is limited to providers within the plan's network. Out-of-network care is typically not covered except in emergencies.
HMOs work well for people with predictable, routine healthcare needs who are comfortable with the referral process and whose preferred doctors are in-network. They work poorly for people who want the flexibility to see specialists directly or who have established relationships with providers outside the network.
PPO — Preferred Provider Organization
PPOs offer more flexibility at a higher premium. You can see any doctor without a referral, and you have access to both in-network providers (at lower cost) and out-of-network providers (at higher cost). PPOs are the most popular plan type for a reason. They accommodate most healthcare situations without requiring prior coordination.
PPOs make the most sense for people who value flexibility, have established specialist relationships, or have healthcare needs that may require care from multiple providers across different systems.
HDHP — High Deductible Health Plan
HDHPs have the lowest premiums of all plan types, paired with a high deductible. A deductible is the amount you pay out-of-pocket before insurance coverage begins. The defining feature of HDHPs is that they are the only plan type that makes you eligible to contribute to a Health Savings Account (HSA), which carries significant tax advantages covered in detail below.
HDHPs work best for generally healthy individuals and families who don't anticipate significant healthcare usage in the coming year and who have the financial cushion to cover the higher deductible if needed. They work poorly for people with chronic conditions, regular specialist needs, or high prescription costs where the deductible would be reached quickly and the premium savings would be erased.
EPO — Exclusive Provider Organization
EPOs sit between HMOs and PPOs. They don't require referrals, so you can see specialists directly, but they restrict coverage strictly to in-network providers. Out-of-network care is not covered except in emergencies. EPOs often carry moderate premiums and represent a reasonable middle ground for people who want referral-free access to specialists but are comfortable staying within a defined network.
Walk through the true cost framework for every plan you're comparing.
The True Cost Framework: Why Premium Alone Is the Wrong Number
The most common and most expensive open enrollment mistake is choosing a plan based on monthly premium without calculating total annual cost.
Here is the framework that produces better decisions:
True annual cost = (Monthly premium × 12) + Expected out-of-pocket costs
And the worst-case scenario: Maximum annual exposure = (Monthly premium × 12) + Out-of-pocket maximum
Walk through this for every plan you're comparing. A plan with a $300 lower monthly premium saves $3,600 per year, but if it carries a $4,000 higher deductible and a higher out-of-pocket maximum, it's only a better deal if you use very little healthcare. If you have one significant health event, the lower-premium plan may cost more.
How to estimate your out-of-pocket costs:
Start with last year as a baseline. How many times did you see a doctor? Did you have any specialist visits, procedures, or emergency care? What did you spend on prescriptions? Use that history to project next year's usage. This is an imperfect predictor, but it’s useful.
Then model each plan under three scenarios: a light-use year (routine care only), an average year (based on last year's usage), and a high-use year (deductible reached). The plan that produces the best outcome across these scenarios, not just the best-case scenario, is usually the right choice.
Network verification matters more than most people realize. A plan with a lower total cost estimate is worthless if your primary care physician, your specialist, or your preferred hospital isn't in-network. Before finalizing any plan selection, verify that the providers you actually use are covered. During this stage, be sure to use the provider search tool available on most insurer websites. It may be worth your time and effort to call your preferred providers to confirm they take the plan you are considering.
Prescription drug coverage deserves its own check. If you take regular medications, look up each drug in the formulary of every plan you're comparing. Drug tier placement, which determines your cost-sharing, varies significantly across plans and can make a substantial difference in annual drug costs.
The HSA: The Most Underused Tax Advantage in Health Insurance
If you're comparing plans and one of your options is an HDHP, the Health Savings Account that comes with it deserves serious attention, because an HSA is one of the most powerful tax-advantaged accounts available to anyone. Unfortunately, Tricare does not qualify as an HDHP. If you are covered by Tricare, you aren’t eligible to participate, even if an HSA is offered by your civilian employer.
The triple tax advantage: HSA contributions are pre-tax (reducing your taxable income in the year of contribution), growth inside the account is tax-free, and withdrawals for qualified medical expenses are tax-free. No other account in the U.S. tax code offers all three simultaneously.
The 2027 HSA contribution limits:
Individual coverage: $4,500
Family coverage: $9,000
Catch-up contribution (age 55 and older): additional $1,000
What makes HSAs exceptional beyond the current-year tax savings:
Unused HSA funds roll over indefinitely. There is no "use it or lose it" rule. A family that contributes to an HSA every year and pays current medical expenses out of pocket (preserving the HSA balance) can accumulate a substantial medical savings reserve over time.
Once an HSA balance reaches a threshold set by the account custodian, typically $1,000 to $2,000, the funds can be invested in mutual funds or ETFs and grown tax-free until needed. Over 20 years of contributions and investment growth, an HSA can become a meaningful supplemental retirement account.
After age 65, HSA funds can be withdrawn for any purpose, not just medical expenses. Non-medical withdrawals are taxed as ordinary income, exactly like a Traditional IRA distribution. This effectively makes the HSA a second Traditional IRA for anyone who reaches 65 with a balance, with the additional benefit that medical withdrawals remain tax-free indefinitely.
Who benefits most from the HDHP + HSA combination:
Generally healthy individuals and families who don't expect to reach their deductible in a typical year
Individuals who have the financial cushion to self-insure the gap between the deductible and coverage
Individuals who want to build long-term medical savings or additional retirement reserves.
Who should be cautious:
People with chronic conditions
People with regular specialist needs
People with high annual prescription costs
For military families, open enrollment intersects with a set of considerations that civilian families don't face.
Military-Specific Considerations
For military families, open enrollment intersects with a set of considerations that civilian families don't face. Again, if you are covered by Tricare, you are not eligible to contribute to an HSA. Tricare does not qualify as a high-deductible health plan.
TRICARE transition windows: Retiring or separating service members and their families who were covered under active duty TRICARE face strict deadlines for establishing new coverage. TRICARE continuation options, including TRICARE Retired Select for qualifying retirees and transitional coverage for certain separating members, have specific enrollment windows that can create coverage gaps if missed. If you are retiring from active duty, you must enroll in a Tricare Retiree health plan within 90 days of your retirement date. If you are separating from active duty, your Tricare coverage ends at 11:59pm on your last day of active duty service. If you're separating or retiring, establish your post-separation health coverage before your active duty TRICARE coverage ends, not after.
TRICARE for Life: Military retirees who are eligible for Medicare receive TRICARE for Life (TFL) as a Medicare supplement at no additional premium cost. TFL pays most costs that Medicare doesn't cover, effectively providing comprehensive coverage for Medicare-eligible military retirees. Understanding how Medicare and TRICARE for Life coordinate, and the importance of enrolling in Medicare Part B at the right time, is a critical retirement planning step for military retirees approaching age 65. The shift from Tricare Retiree to Medicare + Tricare for Life results in an increase in your annual healthcare premium costs.
VA healthcare: Eligible veterans can use VA healthcare alongside civilian or TRICARE coverage. VA healthcare is not a substitute for health insurance in most situations, but it can significantly reduce out-of-pocket costs for service-connected conditions. Understanding how VA coverage coordinates with your primary insurance affects both your plan selection and your total healthcare cost picture.
Military spouses establishing independent coverage: If you were covered under a service member's TRICARE and are now enrolling independently, due to separation, retirement, or a change in eligibility, your loss of TRICARE coverage is a qualifying life event that opens a special enrollment period outside the standard open enrollment window. You do not have to wait for the next open enrollment cycle.
Federal Employees Health Benefits (FEHB): Veterans who move into federal civilian employment after military service gain access to FEHB. This is one of the most comprehensive employer-sponsored health insurance programs available in the country, with the government covering a significant portion of the premium. If you're transitioning to a federal civilian career, evaluate FEHB options carefully. FEHB and Tricare can be combined for a powerful combination of coverage.
Business Owner Health Insurance Strategy
For business owners, health insurance decisions are simultaneously personal financial decisions and business financial decisions, and the tax implications of getting this right are significant.
The self-employed health insurance deduction: Business owners who are not eligible for coverage through a spouse's employer-sponsored plan can deduct 100% of health insurance premiums for themselves, their spouse, and their dependents as an above-the-line deduction on their individual tax return. This deduction reduces adjusted gross income directly, producing a tax benefit regardless of whether you choose to itemize. It's one of the most valuable deductions available to self-employed individuals and is frequently underutilized.
Premium Tax Credits on the ACA Marketplace: Business owners who purchase coverage through the ACA Marketplace may qualify for premium tax credits that reduce the cost of coverage based on income. Eligibility and credit amounts depend on projected annual income relative to federal poverty level thresholds. The interaction between the premium tax credit and the self-employed health insurance deduction requires careful calculation because taking the full deduction reduces AGI, which affects credit eligibility; the optimal approach requires modeling both together.
S-corp owners: If you operate as an S-corporation, health insurance premiums paid by the S-corp on behalf of a more-than-2% shareholder-employee must be included in the shareholder's W-2 wages and then deducted on the individual return. This is a specific transaction that is frequently mishandled. Either the inclusion in W-2 is missed, or the individual deduction isn't taken correctly. Plan to review this with your CPA annually.
Association health plans: Some professional associations and industry trade groups offer group health insurance to members at rates that can be competitive with or better than individual ACA Marketplace plans. If you're a member of a professional association in your field, it's worth investigating whether a group health plan is available. This can be particularly useful if your income level limits premium tax credit eligibility.
Timing your plan selection: Open enrollment decisions made now lock in your health insurance costs for all of 2027. Coordinate your plan selection with your projected 2027 income, particularly if you're near a premium tax credit income threshold, to make the most informed decision possible.
The right health plan is the one that fits your actual healthcare needs and your broader financial plan.
A Decision Framework: Five Questions Before You Choose
Before finalizing your open enrollment selection, work through these five questions:
1. What is my realistic expected healthcare usage next year? Base this on last year's actual usage, any known upcoming needs (planned procedures, ongoing conditions, medications), and a reasonable estimate of unexpected events.
2. What is the total annual cost of each plan I'm considering? Calculate premium × 12 plus estimated out-of-pocket under a typical-use scenario. Then calculate the worst-case: premium × 12 plus out-of-pocket maximum. Compare these numbers, not just the monthly premium.
3. Are my preferred doctors, specialists, and hospital in this plan's network? Verify this directly using the insurer's provider search before enrolling. Do not assume.
4. Does this plan make me eligible for an HSA? If so, would I fund it? If you're choosing an HDHP, commit to funding the HSA. An HDHP without HSA contributions gives up the primary benefit of the plan structure.
5. How does this decision interact with my tax situation? For business owners, this means understanding the self-employed deduction, premium tax credit eligibility, and S-corp treatment. For military families, it means understanding TRICARE coordination, VA healthcare interaction, and FEHB eligibility. For everyone, it means making sure your health insurance decision is a coordinated part of your financial plan.
The Bottom Line
Open enrollment is one of the most financially consequential decisions most people make each year. But it is often the least carefully considered. The premium is the most visible number, but it's rarely the most important one.
The right health plan is the one that fits your actual healthcare needs, your financial situation, and your broader financial plan. That takes more than 20 minutes to determine. But the time you invest in making this decision well pays dividends every month of the year ahead.
If you'd like help thinking through how your health insurance decision fits into your complete financial picture, we'd love to start that conversation.
