2025 Open Enrollment Checklist

To prepare for open enrollment, employers who sponsor group health plans should be aware of compliance changes affecting the design and administration of their health plans for plan years beginning on or after January 1, 2025. These changes include limits that are adjusted for inflation each year, such as the Affordable Care Act’s (“ACA”) affordability percentage and cost-sharing limits for high deductible health plans (“HDHPs”). Employers should review their health plan’s design to confirm that it has been updated, as necessary, for these changes.

In addition, any changes to a health plan’s benefits for the 2025 plan year should be communicated to plan participants through an updated summary plan description (“SPD”) or a summary of material modifications (“SMM”).

Health plan sponsors should also confirm that their open enrollment materials contain the required participant notices, such as the summary of benefits and coverage (“SBC”), when applicable. Some participant notices must also be re-distributed annually or upon initial enrollment. To minimize costs and streamline administration, employers should consider including these notices in their open enrollment materials and within their online platforms.

Employer Action Items

• Employers and plan sponsors should contact their benefits professional for the required 2025 notices.
• Applicable large employers (“ALEs”) and plan sponsors should confirm that at least one of their health plans will satisfy the ACA’s coverage standards for the 2025 plan year.
• Employers and plan sponsors with HDHPs should confirm that their plan’s deductible and out-of-pocket maximum comply with the 2025 limits.
• Employers and plan sponsors should communicate plan design changes to employees as part of the open enrollment process.

Summary

Plan Design Changes for 2025:

ACA Affordability Standard

The ACA requires ALEs to offer affordable, minimum-value health coverage to their full-time employees (and dependents) or risk paying a penalty to the IRS. This employer mandate is also known as the “pay-or-play” mandate. An ALE is an employer that averages at least 50 full-time employees and full-time equivalent employees, during the preceding calendar year.

An ALE’s health coverage is considered affordable if the employee’s required contribution for the lowest cost self-only coverage that provides minimum value does not exceed 9.5% (as adjusted) of the employee’s household income for the taxable year. For plan years beginning in 2024, the adjusted affordability percentage is 8.39%. On September 6, 2024, the IRS announced that the affordability percentage will increase to 9.02% for plan years beginning in 2025.

Out-of-Pocket Maximum Limits

Non-grandfathered health plans and health insurance issuers are subject to limits on cost sharing for essential health benefits (“EHBs”). EHBs reflect the scope of benefits covered by a typical employer plan and must include items and services in 10 general categories, including emergency services, hospitalization, ambulatory patient services, prescription drugs, pregnancy, maternity and newborn care, mental health and substance use disorder services, rehabilitative and habilitative services, laboratory services, preventive and wellness services and chronic disease management, and pediatric services.

The annual limits on total enrollee cost sharing for EHBs for plan years beginning on or after January 1, 2025, are $9,200 for self-only coverage and $18,400 for family coverage.

Preventive Care Benefits

The ACA requires non-grandfathered health plans and issuers to cover a set of recommended preventive services without imposing cost-sharing requirements, such as deductibles, copayments or coinsurance, when the services are provided by in-network providers.  Please note the expansion of preventive services for HDHPs was announced by the IRS on October 17, 2024, in Notice 2024-75.

Health FSA Contributions

The ACA imposes a dollar limit on employees’ pre-tax contributions to a health flexible spending account (“FSA”). This limit is indexed each year for cost-of-living adjustments. An employer may set their own dollar limit on employees’ contributions to a health FSA as long as the employer’s limit does not exceed the ACA’s maximum limit in effect for the plan year.

For plan years beginning in 2024, the health FSA limit is $3,200. For plan years beginning in 2025, the health FSA limit increases to $3,300 and the rollover maximum is $660.

HDHP and HSA Limits

The IRS limits for HSA contributions, HDHP minimum deductibles and HDHP maximum out-of-pocket expenses all increase for 2025. The HSA contribution limits will increase effective January 1, 2025, while the HDHP cost-sharing limits will increase effective for plan years beginning on or after January 1, 2025.

The following table contains the HDHP and HSA limits for 2025 compared to 2024. It also includes the catch-up contribution limit that applies to HSA-eligible individuals aged 55 and older, which is not adjusted for inflation and is uniform year to year.

HDHPs: Expiration of Design Options

To be eligible for HSA contributions for a month, an individual must be covered under an HDHP as of the first day of the month and have no other impermissible coverage. In general, except for preventive care benefits, no benefits can be paid by an HDHP until the minimum annual deductible has been satisfied. However, there are a few narrow exceptions to the minimum deductible requirement, including the following exceptions that are expiring:

• For plan years ending after December 31, 2024, an HDHP is no longer permitted to provide benefits for COVID-19 testing and treatment without a deductible (or with a deductible below the minimum deductible for an HDHP); and
• For plan years beginning on or after January 1, 2025, an HDHP is no longer permitted to provide benefits for telehealth or other remote care services before plan deductibles are satisfied. To be eligible for HSA contributions for a month, an individual must be covered under an HDHP as of the first day of the month and have no other impermissible coverage.

Additional Resources:

(a partial list of annual model notices)

• Model Summary of Benefit Coverage (“SBC”) template.
• HIPAA Privacy model notice.
• Model notice of patient protections.
• Grandfathered plan model notice.
• Model Medicare Part D credibility notices site.
• Annual Children’s Health Insurance Program model notice.
• Women’s Health and Cancer Rights Act model notices.
• Initial COBRA model notice.