Every year, health insurance “open enrollment” shows up as a stack of forms or a flurry of online options: Plan A vs. Plan B, higher premiums vs. higher deductibles, HSA-eligible or not. Most people treat these as one-year questions—how to keep costs manageable until next renewal.
From an estate-planning perspective, though, your healthcare elections can shape far more than next year’s budget. They influence your exposure to major medical bills, how quickly long-term care costs can erode savings, whether Medicaid ever becomes part of the picture, and how much remains for heirs if you face serious illness later in life.
Many people carefully plan where assets will go, but leave healthcare choices in a separate box. In reality, the two are tightly connected.
Rising Healthcare Costs Can Quietly Drain an Estate
Healthcare is one of the fastest-growing expenses many retirees face. The Kaiser Family Foundation’s 2024 Employer Health Benefits Survey reports that average annual premiums for employer-sponsored family coverage exceed $24,000, and covered workers contribute, on average, $6,296 toward the cost of family coverage.
Deductibles have also climbed over time. KFF reports that the share of covered workers in plans with a general annual deductible has increased, and average deductible amounts have risen over the last decade.
For older adults, the picture extends beyond standard health insurance. The national median annual cost of a private nursing home room is $127,750, with home health aide services varying by market and often exceeding $70,000 annually in many regions. These costs can erode savings quickly if they are not anticipated in a broader estate plan.
Family members often shoulder part of this burden. AARP’s caregiving research shows that family caregivers frequently incur significant out-of-pocket expenses supporting aging relatives—costs that can affect the caregiver’s own savings and financial stability.
When health coverage and long-term care risks are left out of estate planning, families may discover too late that the plan on paper doesn’t match the reality of illness, caregiving, and cost.
Why Open Enrollment Decisions Belong in Your Estate Conversation
Open enrollment is often treated as HR homework, but several elections can have long-term implications.
High-deductible vs. traditional plans
High-deductible health plans paired with Health Savings Accounts (HSAs) offer three core tax advantages: contributions are tax-advantaged, growth is tax-free, and withdrawals for qualified medical expenses are tax-free. Balances also roll over year to year and can be used later in retirement.
However, HDHPs also come with higher out-of-pocket exposure—risk that matters if a major health event occurs before you’ve built sufficient reserves.
HSA contributions as a future medical reserve
For households able to fund them, HSAs can function as a dedicated medical bucket inside a larger financial and estate plan. The IRS has announced that for 2026, the HSA contribution limit is $4,400 for self-only coverage and $8,750 for family coverage, with the $1,000 catch-up contribution for those age 55+ unchanged.
Those funds can later help cover qualified medical expenses and certain Medicare-related costs, potentially reducing the need to liquidate other assets.
Supplemental disability and life insurance
Employer-provided disability coverage can protect income if illness limits your ability to work, which can reduce the need to draw down retirement savings early. Life insurance can provide liquidity, but coverage amounts, ownership structure, and portability should be evaluated in the context of your broader plan.
Long-term care options
Some policies include long-term care riders or separate long-term care coverage. Premiums may be significant, but even partial coverage can reduce the likelihood that a prolonged care need forces liquidation of assets you intended to leave to family. (This is a planning discussion worth having early, before a crisis.)
Each of these choices affects not only this year’s cash flow, but also how resilient your plan is if you face a major health event.
Medicaid, Spend-Down Rules, and Estate Recovery
For families without sufficient private coverage or savings, Medicaid may become the default payer of long-term care. Medicaid is means-tested, and eligibility often requires spending down assets to low thresholds before coverage begins.
Medicaid estate recovery adds another layer. Federal law requires states to seek recovery from the estates of certain deceased Medicaid beneficiaries (particularly those who received long-term services and supports), with key protections for surviving spouses and certain children.
From an estate-planning perspective, that means:
- Assets you intended for heirs may be consumed by care costs first.
- The home can be at risk in certain circumstances if planning isn’t coordinated.
- Failing to align healthcare choices with legal tools (titling, beneficiary designations, and appropriate trust planning where relevant) can limit options later.
Thoughtful planning does not guarantee avoidance of Medicaid or estate recovery, but it can help families avoid unintended exposure and preserve flexibility.
Practical Steps to Align Health Choices With Your Estate Plan
The goal is not to turn open enrollment into a legal seminar. It is to make sure your healthcare elections support, rather than undermine, the legacy you’re trying to build.
- Review your coverage with long-term goals in mind
Ask how each plan handles high-cost scenarios, such as hospitalization, specialty drugs, and surgery, not just routine care. - Integrate HSAs into your estate conversation
Decide whether you are using your HSA for current expenses or deliberately building it as a future medical reserve. Confirm beneficiary designations align with your broader plan. - Evaluate disability and life insurance in context
Don’t just check the box. Consider your total protection: existing policies, assets, and obligations. - Talk about long-term care before it’s needed
Planning early opens more options than waiting until a crisis. - Update legal documents when coverage or health changes
Coverage changes, major diagnoses, retirement transitions, or caregiving shifts are all moments to revisit powers of attorney and healthcare directives.
Conclusion
Wills, trusts, and powers of attorney remain essential. But the way you fund healthcare risk over a lifetime affects whether those documents play out as intended.
For many families, the biggest threats to their legacy are not market fluctuations or tax law alone. They are unplanned medical events, long-term care needs, and the quiet erosion of savings through out-of-pocket costs.
If you want your estate plan to reflect reality, not just best-case scenarios, your healthcare decisions and your legal planning need to be in conversation with each other.
To explore how your current coverage, long-term care exposure, and estate plan fit together, visit BascomLaw.com to schedule a consultation. Integrating these pieces now can help protect both your health and your legacy later.
Sources
Genworth & CareScout. Cost of Care Survey
CMS/Medicaid.gov. Estate Recovery
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