At this time of year, an open enrollment notice arrives in the company email inbox. Most people just stick with last year's plan, but I think that's the biggest waste of an opportunity.

While the difference in premiums may seem small when looking at just one month, over a year it adds up to a significant amount of money. It's not just savings accounts that can accumulate wealth.

First, let's clarify what the three plans are and how they differ. The names may sound complicated, but the structure is simpler than you might think.

HMO plans require you to receive care only within a designated network, but they typically have lower premiums and out-of-pocket costs. You usually select a primary care physician, and to see a specialist, you need a referral from your primary doctor.

The biggest limitation of HMO plans is that most out-of-network care is not covered unless it's an emergency.

PPO plans allow you to see specialists without a referral and provide access to out-of-network hospitals, although you'll pay a higher out-of-pocket cost. Generally, the freedom comes with a higher monthly premium.

HDHPs have higher deductibles but lower premiums. The key point is that enrolling in this plan allows you to open a Health Savings Account (HSA).

Looking at the numbers helps clarify things. According to the IRS, as of May this year, the minimum deductible for an HSA-eligible HDHP is $1,750 for individuals and $3,500 for families.

For the same criteria, the out-of-pocket maximum for HDHPs is set at $8,700 for individuals and $17,400 for families.

The HSA contribution limits for 2027 are $4,500 for individuals and $9,000 for families, which is an increase of $100 and $250, respectively, from 2026.

If you're over 55, you can contribute an additional $1,000. Every time I see this catch-up provision, I feel like I'm gaining another retirement account.

The appeal of HSAs lies in the triple tax benefits: contributions are tax-deductible, earnings grow tax-free, and withdrawals for medical expenses are also tax-free.

If you contribute through payroll deductions, you also avoid Social Security and Medicare payroll taxes. Washington state has no state income tax, so the federal benefits are substantial, even if that's all you get.

Additionally, HSA balances do not expire at the end of the year and remain yours even if you change jobs. This is the main difference from FSAs.

As a note, the One Big Beautiful Bill Act signed in July 2025 permanently established that HSA eligibility is maintained even if you receive telehealth services before meeting your deductible under an HDHP.

Starting in 2026, direct primary care fees of $150 per month (or $300 for families) will not affect HSA eligibility and can be paid using HSA funds.

So, who should choose what? My criteria are last year's medical expense receipts and a list of frequently visited hospitals.

If you only visit the doctor once or twice a year and rarely take medication, the combination of HDHP and HSA is likely to be beneficial. The savings on premiums can be deposited into the HSA, turning it into an asset.

On the other hand, if you frequently see specialists due to chronic conditions or have plans for childbirth or surgery, the calculations change. If you nearly meet your deductible every year, the advantages of HDHP diminish significantly.

If you already have a preferred doctor and hospital within the network, HMO can be a reasonable choice. While many complain about the hassle of referrals, the actual inconvenience is often less than expected.

If you have children attending school in another state or frequently travel for work and need to use various local hospitals, a PPO might provide more peace of mind.

When comparing plans, don't just look at the monthly premium; add the annual premium to the expected out-of-pocket costs, and subtract any company contributions to the HSA to calculate the total for each plan. If your company provides seed money for the HSA, it can significantly change the outcome.

It's also important to consider the worst-case scenario. By calculating the total annual costs for each plan when reaching the out-of-pocket maximum due to a major illness, you can see which plan's risks you can manage.

There's also a common pitfall to watch out for. If your spouse's company provides a general health FSA that covers your medical expenses, you lose HSA contribution eligibility.

In such cases, you can consider switching to a limited-purpose FSA for dental and vision expenses only. Ask your company's benefits administrator if there are options available.

If you use an FSA, the limit for 2026 was $3,400, and you'll need to check the IRS's fall announcement for the 2027 limit. Unused amounts generally expire, so it's best not to overestimate your needs.

Finally, make sure to check if your primary care physician and frequently visited pharmacy are in the new plan's network and if your medications are on the formulary. You can quickly find this information by searching on the insurance company's website.

If you are taking medications or undergoing treatment, it's wise to consult with your doctor or pharmacist before changing plans.

If I were in your position, I would choose HDHP and max out the HSA, as long as I don't have any major chronic illnesses. I would pay for minor medical expenses out of pocket and keep the receipts, allowing the HSA to grow like an investment account over time.

Once open enrollment ends, you'll have to wait a year unless you have a special reason like marriage or childbirth. Mark the deadline on your calendar and invest just 30 minutes to review your options.