Health-care costs hit post-pandemic high. Open enrollment moves can help

Published

6 months ago

October 14, 2024

Personal Finance Tips 2024: Health Insurance

About 165 million Americans get their health insurance through work, and yet most don’t spend much time considering what their employer is offering in the way of benefits and what it will cost.

In fact, employees only spent about 45 minutes a year, on average, deciding which benefit options suit them best, a report from Aon found.

Open enrollment season, which typically runs through early December, is an opportunity to take a closer look at what’s at stake.

And, for starters, costs are going way up.

Costs are rising

The cost of health care has been rising steadily for years. More recently, there’s been a noticeable jump.

For employers, those cost increases are reaching a post-pandemic high, according to WTW, a consulting firm formerly known as Willis Towers Watson. U.S. employers project their health-care costs will increase by 7.7% in 2025, compared with 6.9% in 2024 and 6.5% in 2023, the firm said.

Because of higher costs, employers are considering new ways to adjust their plan offerings, WTW found.

To that point, 52% of companies said they plan to implement programs that will reduce total costs, and just as many intend to steer to lower-cost providers and sites of care, which may mean a narrower network of doctors from which to choose.

Currently, employers subsidize about 81% of health-care plan costs, on average, while employees pay the remainder, according to professional services firm Aon.

However, some of the higher costs will also inevitably get passed on to employees.

Roughly one-third, or 34%, of employers expect to shift some of the expense to employees through higher premiums or by raising co-pays on high-deductible health plans in the year ahead, the WTW report found.

The cost per employee is expected to jump 5.8% on average in 2025, marking the third consecutive year of health benefit cost increases above 5%, after a decade of averaging only around 3%, according to a separate report by consulting firm Mercer.

“These are changes employees will feel,” said Beth Umland, Mercer’s research director of health and benefits.

For workers, health-care expenses are already high: Family premiums for employer-sponsored health insurance rose 7% this year to an average of $25,572, KFF’s 2024 benchmark employer health survey found. Workers are responsible for more than $6,200 of that amount, while employers pick up the rest.

“With cost increases reaching a post-pandemic high, companies are concerned about the burden it’s putting on their workforces, especially since it affects decisions about insurance coverage and care,” Tim Stawicki, WTW’s chief actuary of health and benefits, said in a statement.

Consider your health-care expenses

Often employees are presented with options for medical insurance plan selections: one with a higher monthly cost, known as your premium, and a lower deductible, which is the amount you’ll have to shell out before your employer’s plan kicks in, and another option with higher out-of-pocket costs but lower premiums.

“Most of the time when you go through open enrollment, the first thing you see is the deductible and out-of-pocket costs,” said Regina Ihrke, WTW’s health, equity and wellbeing leader for North America.

When weighing options, use previous years as a guide, advised Gary Kushner, chair and president of Kushner & Company, a benefits design and management company.

He said you should consider: “Am I a low-, medium- or high-claims family? Did I have an incident that required acute care or basically lots of preventative care?”

If you usually only go to the doctor, say, once a year for a check-up, you might want to opt for the so-called high-deductible plan with the lower monthly cost.

Health savings accounts

Along with a high-deductible health insurance plan, more than 50% of employers also offer a health savings account, or HSA, which can help with additional health-care costs.

To be able to use an HSA, you must have an eligible high-deductible health plan. The IRS defines “high-deductible” as at least $1,650 for self-only plans or $3,300 for family coverage for 2025.

The IRS also determines the maximum allowed contribution each year: The new HSA contribution limit for 2025 will be $4,300 for individuals, up from $4,150 in 2024, and $8,550 for families, up from $8,300 in 2024. Employees 55 or older can make an additional $1,000 catch-up contribution over the IRS annual limits.

HSA contributions then grow on a tax-free basis, and the funds can cover out-of-pocket expenses, including doctor visits and prescription drugs, including expensive weight-loss medications.

As costs continue to go up, HSAs are a key safety net for managing these out-of-pocket expenses, WTW’s Ihrke said. Any money you don’t use can be rolled over year to year.

“Make sure you are considering how to put some money into that savings account so you can use it to pay for a doctor’s bill or save it for future years,” Ihrke explained.

Life and disability insurance

During open enrollment, employees may also be presented with different disability and life insurance options, which are often included in a standard benefits package.

Employer-issued life insurance policies typically amount to a year’s salary. You can buy additional life insurance through your employer. This is called supplemental life insurance, or voluntary life insurance, and it’s optional coverage that you can add to your employer’s basic group policy.

With disability insurance, there are two basic kinds: Short-term disability generally replaces 60% to 70% of your base salary and premiums are often paid by your employer. Long-term disability, which ordinarily kicks in after three months to six months, typically replaces 40% to 60% of your income.

Even if you have these policies through work, it could be a fraction of what you need to protect young children or other dependents.

Consider what’s the right amount for you and your family, then weigh whether you want to buy additional coverage, or supplemental insurance, through your workplace group plan or shop for your own policy, a move many advisors recommend.

Take advantage of voluntary benefits

Additional benefits may be optional but equally important these days, particularly when it comes to well-being. Going into open enrollment, nearly 1 in 5 employees cite deteriorating mental health, according to a recent report by Gallagher.

“More so than ever we are seeing employers looking to address the broadening needs in their workforce,” said Tom Kelly, principal in the Gallagher health and benefits practice, and “today’s employees are looking for more holistic wellbeing support.”

Companies focused on employee wellbeing, says AXA CEO

Personal Finance

Trump administration loses appeal of DOGE Social Security restraining order

Published

12 hours ago

April 2, 2025

Business Finance News

A person holds a sign during a protest against cuts made by U.S. President Donald Trump’s administration to the Social Security Administration, in White Plains, New York, U.S., March 22, 2025.

Nathan Layne | Reuters

The Trump administration’s appeal of a temporary restraining order blocking the so-called Department of Government Efficiency from accessing sensitive personal Social Security Administration data has been dismissed.

The U.S. Court of Appeals for the 4th Circuit on Tuesday dismissed the government’s appeal for lack of jurisdiction. The case will proceed in the district court. A motion for a preliminary injunction will be filed later this week, according to national legal organization Democracy Forward.

The temporary restraining order was issued on March 20 by federal Judge Ellen Lipton Hollander and blocks DOGE and related agents and employees from accessing agency systems that contain personally identifiable information.

That includes information such as Social Security numbers, medical provider information and treatment records, employer and employee payment records, employee earnings, addresses, bank records, and tax information.

DOGE team members were also ordered to delete all nonanonymized personally identifiable information in their possession.

The plaintiffs include unions and retiree advocacy groups, namely the American Federation of State, County and Municipal Employees, the Alliance for Retired Americans and the American Federation of Teachers.

“We are pleased the 4th Circuit agreed to let this important case continue in district court,” Richard Fiesta, executive director of the Alliance for Retired Americans, said in a written statement. “Every American retiree must be able to trust that the Social Security Administration will protect their most sensitive and personal data from unwarranted disclosure.”

The Trump administration’s appeal ignored standard legal procedure, according to Democracy Forward. The administration’s efforts to halt the enforcement of the temporary restraining order have also been denied.

“The president will continue to seek all legal remedies available to ensure the will of the American people is executed,” Liz Huston, a White House spokesperson, said via email.

Fiserv CEO on the nomination to Social Security Commisioner role

The Social Security Administration did not respond to a request from CNBC for comment.

Immediately after the March 20 temporary restraining order was put in place, Social Security Administration Acting Commissioner Lee Dudek said in press interviews that he may have to shut down the agency since it “applies to almost all SSA employees.”

Dudek was admonished by Hollander, who called that assertion “inaccurate” and said the court order “expressly applies only to SSA employees working on the DOGE agenda.”

Dudek then said that the “clarifying guidance” issued by the court meant he would not shut down the agency. “SSA employees and their work will continue under the [temporary restraining order],” Dudek said in a March 21 statement.

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Personal Finance

Most credit card users carry debt, pay over 20% interest: Fed report

Published

14 hours ago

April 2, 2025

Business Finance News

Julpo | E+ | Getty Images

Many Americans are paying a hefty price for their credit card debt.

As a primary source of unsecured borrowing, 60% of credit cardholders carry debt from month to month, according to a new report by the Federal Reserve Bank of New York.

At the same time, credit card interest rates are “very high,” averaging 23% annually in 2023, the New York Fed found, also making credit cards one of the most expensive ways to borrow money.

“With the vast majority of the American public using credit cards for their purchases, the interest rate that is attached to these products is significant,” said Erica Sandberg, consumer finance expert at CardRates.com. “The more a debt costs, the more stress this puts on an already tight budget.”

Most credit cards have a variable rate, which means there’s a direct connection to the Federal Reserve’s benchmark. And yet, credit card lenders set annual percentage rates well above the central bank’s key borrowing rate, currently targeted in a range between 4.25% to 4.5%, where it has been since December.

Following the Federal Reserve’s rate hike in 2022 and 2023, the average credit card rate rose from 16.34% to more than 20% today — a significant increase fueled by the Fed’s actions to combat inflation.

“Card issuers have determined what the market will bear and are comfortable within this range of interest rates,” said Matt Schulz, chief credit analyst at LendingTree.

APRs will come down as the central bank reduces rates, but they will still only ease off extremely high levels. With just a few potential quarter-point cuts on deck, APRs aren’t likely to fall much, according to Schulz.

Despite the steep cost, consumers often turn to credit cards, in part because they are more accessible than other types of loans, Schulz said.

In fact, credit cards are the No. 1 source of unsecured borrowing and Americans’ credit card tab continues to creep higher. In the last year, credit card debt rose to a record $1.21 trillion.

Because credit card lending is unsecured, it is also banks’ riskiest type of lending.

“Lenders adjust interest rates for two primary reasons: cost and risk,” CardRates’ Sandberg said.

The Federal Reserve Bank of New York’s research shows that credit card charge-offs averaged 3.96% of total balances between 2010 and 2023. That compares to only 0.46% and 0.43% for business loans and residential mortgages, respectively.

As a result, roughly 53% of banks’ annual default losses were due to credit card lending, according to the NY Fed research.

“When you offer a product to everyone you are assuming an awful lot of risk,” Schulz said.

Further, “when times get tough they get tough for most everybody,” he added. “That makes it much more challenging for card issuers.”

The best way to pay off debt

The best move for those struggling to pay down revolving credit card debt is to consolidate with a 0% balance transfer card, experts suggest.

“There is enormous competition in the credit card market,” Sandberg said. Because lenders are constantly trying to capture new cardholders, those 0% balance transfer credit card offers are still widely available.

Cards offering 12, 15 or even 24 months with no interest on transferred balances “are basically the best tool in your toolbelt when it comes to knocking down credit card debt,” Schulz said. “Not accruing interest for two years on a balance is pretty hard to argue with.”

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Personal Finance

The 60/40 portfolio may no longer represent ‘true diversification’: Fink

Published

16 hours ago

April 2, 2025

Business Finance News

Andrew Ross Sorkin speaks with BlackRock CEO Larry Fink during the New York Times DealBook Summit in the Appel Room at the Jazz at Lincoln Center in New York City on Nov. 30, 2022.

Michael M. Santiago | Getty Images

It may be time to rethink the traditional 60/40 investment portfolio, according to BlackRock CEO Larry Fink.

In a new letter to investors, Fink writes the traditional allocation comprised of 60% stocks and 40% bonds that dates back to the 1950s “may no longer fully represent true diversification.”

“The future standard portfolio may look more like 50/30/20 — stocks, bonds and private assets like real estate, infrastructure and private credit.” Fink writes.

Most professional investors love to talk their book, and Fink is no exception. BlackRock has pursued several recent acquisitions — Global Infrastructure Partners, Preqin and HPS Investment Partners — with the goal of helping to increase investors’ access to private markets.

The effort to make it easier to incorporate both public and private investments in a portfolio is analogous to index versus active investments in 2009, Fink said.

Those investment strategies that were then considered separately can now be blended easily at a low cost.

Fink hopes the same will eventually be said for public and private markets.

Yet shopping for private investments now can feel “a bit like buying a house in an unfamiliar neighborhood before Zillow existed, where finding accurate prices was difficult or impossible,” Fink writes.

60/40 portfolio still a ‘great starting point’

After both stocks and bonds saw declines in 2022, some analysts declared the 60/40 portfolio strategy dead. In 2024, however, such a balanced portfolio would have provided a return of about 14%.

“If you want to keep things very simple, the 60/40 portfolio or a target date fund is a great starting point,” said Amy Arnott, portfolio strategist at Morningstar.

If you’re willing to add more complexity, you could consider smaller positions in other asset classes like commodities, private equity or private debt, she said.

However, a 20% allocation in private assets is on the aggressive side, Arnott said.

The total value of private assets globally is about $14.3 trillion, while the public markets are worth about $247 trillion, she said.

For investors who want to keep their asset allocations in line with the market value of various asset classes, that would imply a weighting of about 6% instead of 20%, Arnott said.

Yet a 50/30/20 portfolio is a lot closer to how institutional investors have been allocating their portfolios for years, said Michael Rosen, chief investment officer at Angeles Investments.

BlackRock CEO Larry Fink: Infrastructure will be the largest growing sector in private capital

The 60/40 portfolio, which Rosen previously said reached its “expiration date,” hasn’t been used by his firm’s endowment and foundation clients for decades.

There’s a key reason why. Institutional investors need to guarantee a specific return, also while paying for expenses and beating inflation, Rosen said.

While a 50/30/20 allocation may help deliver “truly outsized returns” to the mass retail market, there’s also a “lot of baggage” that comes with that strategy, Rosen said.

There’s a lack of liquidity, which means those holdings aren’t as easily converted to cash, Rosen said.

What’s more, there’s generally a lack of transparency and significantly higher fees, he said.

Prospective investors should be prepared to commit for 10 years to private investments, Arnott said.

And they also need to be aware that measurement issues with asset classes like private equity means past performance data may not be as reliable, she said.

For the average person, the most likely path toward tapping into private equity will be part of a 401(k) plan, Arnott said. So far, not a lot of companies have added private equity to their 401(k) offerings, but that could change, she said.

“We will probably see more plan sponsors adding private equity options to their lineups going forward,” Arnott said.