Health insurance open enrollment: Use this 'algorithm' to pick a plan, financial advisor says

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Open enrollment season is upon us — and that means millions of Americans will soon need to pick their health insurance plan for 2027.

The choice can have big financial consequences for households, which, with a few exceptions, are generally locked into their insurance plan for a year before being able to switch.

But choosing a health insurance plan isn't always a straightforward decision, experts said.

Consumers who buy insurance through an employer or on the Affordable Care Act marketplace may have a hodgepodge of plans to choose from, with different premiums, cost-sharing provisions, doctor networks and other factors to consider.

Households are grappling with such choices amid soaring healthcare costs, in some cases forcing them to make difficult financial trade-offs during open enrollment, experts said.

"Employers are passing through the costs more and more in different ways to employees, so it's important for employees to have their thinking cap on when deciding how to choose their benefits," said Carolyn McClanahan, a physician and certified financial planner based in Jacksonville, Florida.

She said she recommends consumers use a two-question "algorithm" when determining which plan is right for them.

Here are some important things to consider during open enrollment this year.

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Open enrollment is the period during which people can enroll in, renew or change their health plans for the coming year.

Most Americans under age 65 — about 166 million people — get health insurance via employer-sponsored health plans.

Employers have flexibility to set their own open enrollment periods, but typically hold them in the fall and for about a month, said JoAnn Volk, founder and co-director of the Center on Health Insurance Reforms at Georgetown University.

An additional 19.2 million Americans were enrolled in a health insurance plan through the Affordable Care Act marketplace for 2026, according to figures published by the U.S. Department of Health and Human Services in June.

Participants are typically self-employed, gig workers, early retirees, small business owners and others who don't get health insurance at work, or through federal programs such as Medicare or Medicaid.

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In states that use the federal ACA marketplace, open enrollment runs from Nov. 1, 2026, to Jan. 15, 2027.

Consumers must enroll by Dec. 15 in order for coverage to start at the beginning of 2027. Coverage starts Feb. 1 for those who enroll in or change their plans from Dec. 16 through Jan. 15.

Certain states run their own marketplaces rather than relying on the federally run marketplace.

Those states' open enrollment periods may differ: For example, they may allow signups later into December to still get coverage that starts Jan. 1, run longer enrollment windows or start earlier than Nov. 1, Volk said.

Idaho's open enrollment starts Oct. 15 and Connecticut's starts Oct. 23, for example.

Consumers can shop for health plans on healthcare.gov and navigate to their respective state marketplace to enroll.

Volk said she recommends consumers type the URL to directly navigate to healthcare.gov rather than using a search tool such as Google to look for terms like "ACA marketplace" or "Obamacare."

A study published in August by Georgetown University's Center on Health Insurance Reforms found that consumers who searched for coverage online via tools such as Google were "frequently routed towards products not regulated by the ACA" with fewer consumer protections.

Here are the two questions that McClanahan, the founder of Life Planning Partners and a member of CNBC's Financial Advisor Council, said she recommends considering when comparing options during open enrollment:

1. Is choice or cost more important to you?

The answer to this question will help consumers pick from among the alphabet soup of health plan types: HMO, EPO, PPO and POS plans, for example.

If consumers have a lot of health problems or get sick often, and they want ample leeway to see a broad roster of doctors, a preferred provider organization, or PPO, plan might be best, McClanahan said.

PPO plans generally have more flexibility than other plan types, allowing for out-of-network and specialist visits without a referral from a primary care doctor. However, the trade-off is they typically carry higher premiums.

By contrast, health maintenance organization, or HMO, plans are "budget-friendly" plans with lower monthly payments, according to Aetna, an insurer. However, they're more rigid: The plans require consumers to pick in-network doctors and get referrals from a primary care physician before seeing a specialist.

In the middle of cost and flexibility are exclusive provider organization, or EPO, and point of service, POS, plans, experts said. EPO plans require in-network services for insurance coverage, but generally come with more choice than HMOs. POS plans require referrals for a specialist visit but allow for some out-of-network coverage.

Cost goes beyond comparing premiums, though.

Consumers should also understand differences between cost-sharing provisions such as deductibles, co-insurance and out-of-pocket maximums, experts said:

• Deductible: This is the annual sum a consumer must pay out of pocket before the health insurer starts to pay for many services.
• Co-insurance: A percentage of health costs that the consumer shares with the insurer. This cost-sharing generally kicks in after you've paid your annual deductible.
• Out-of-pocket max: This is a limit on the total cost-sharing consumers pay during the year — including co-pays, co-insurance and deductibles.

"A lot of people don't understand the nuances," McClanahan said.

Ultimately, consumers must ensure the plan will cover the doctors and prescriptions they use, Volk said.

She said she recommends consulting the health plan's provider directory and calling individual doctors to verify they're in-network for that specific health plan in case the published directory is out of date. The health plan website should also have a link to the "formulary" with a list of covered prescription drugs, she said.

"Do some checking to make sure it's the plan for you," Volk said.

2. Do you want a health savings account?

Health savings accounts are tax-advantaged savings accounts that allow people to save for qualifying healthcare expenses. Account holders can generally save their money in cash and invest funds within the accounts, similar to a retirement account like a 401(k).

They come with a three-pronged tax break: Contributions are tax-free, investment growth is tax-deferred, and withdrawals are tax-free if used for eligible medical costs.

Those unique tax benefits can trump those of 401(k) plans and individual retirement accounts, according to financial advisors.

Unlike with flexible spending accounts, consumers don't have to spend HSA funds during a given year. They can invest their HSA funds, much like other types of investment accounts, if they can pay for medical care out of pocket.

"It's a great backdoor way for people to save money for future healthcare expenses if they end up not needing it now," McClanahan said.

Contributing to an HSA is a "no-brainer" for people in higher federal income tax brackets, like those that are 22% and above, she said.

However, consumers are only eligible for a health savings account if they enroll in a health plan with a high deductible. Among other conditions, plans must generally have a $1,750 minimum deductible for individuals or $3,500 for families to qualify as high-deductible plans in 2027. Starting in 2026, "bronze" and "catastrophic" plans are treated as HSA-compatible even if they don't meet the typical definition of a high-deductible health plan.

High-deductible plans aren't right for everyone, McClanahan said.

For example, the HSA only makes sense for people who can afford to fund the account, she said. The contribution limit is $4,500 for individuals and $9,000 for families in 2027.

Additionally, enrolling in a high-deductible plan may make less financial sense for people who need frequent care and who use their health insurance often, or those who don't have enough money to meet their annual deductible, McClanahan said.

"People who should choose the non-HSA plan are those who don't have the financial resources to meet their deductible if they get sick, or if they don't have the money to fund the HSA," she said.