How it works
Open enrolment presents plans by premium, which is the one number that reliably misleads. The true cost of a health plan is the premium you pay whether or not you use care, plus the deductible you pay before the plan pays anything, plus your coinsurance share after that — all capped by the out-of-pocket maximum. This estimator assembles those four pieces against your expected medical spending for the year. The order matters. Care costs come out of your pocket until the deductible is met; after that you pay only your coinsurance percentage, commonly 20%; and once your combined payments hit the out-of-pocket maximum, the plan covers everything else in full. That structure is why a low-premium high-deductible plan and an expensive low-deductible plan can trade places depending on the year. In a healthy year, the cheap premium wins outright. In a year with surgery, both plans push you to the out-of-pocket maximum, and the plan with the lower premium wins again — which is the argument for high-deductible plans that many people miss. The plans that win in the middle are the ones matched to steady, predictable care: a chronic prescription, therapy, or a pregnancy. Run the estimate at your realistic spending and again at the worst case, then choose the plan whose two answers you can both live with.
Formula
Total = premium x 12 + min(out-of-pocket max, deductible + (claims - deductible) x coinsurance)
Tips
- Estimate expected costs from last year's explanation-of-benefits statements, not from memory.
- Compare the worst case too — the plan with the lower premium plus out-of-pocket maximum is the safer bet in a bad year.
- A high-deductible plan paired with an HSA adds a triple tax advantage that often outweighs the higher deductible.
- Check that your doctors and prescriptions are in network on the specific plan; a cheaper premium with an out-of-network specialist is not cheaper.
- Premiums are usually pre-tax through an employer, which quietly reduces the real cost by your marginal rate.
Frequently asked questions
- How do I compare health insurance plans properly?
- Add the annual premium to what you would actually pay for your expected care under each plan's deductible and coinsurance, capped at the out-of-pocket maximum. Then compare the worst case as well. The plan with the lowest premium and the plan with the lowest total cost are frequently not the same plan.
- Is a high-deductible health plan worth it?
- It usually wins in low-cost years and in very high-cost years, because both plans hit the out-of-pocket maximum in a bad year and the cheaper premium then decides it. It loses in the middle, where steady predictable care runs above the deductible but well below the maximum. Pairing it with an HSA strengthens the case considerably.
- What is the difference between a deductible and an out-of-pocket maximum?
- The deductible is what you pay before the plan starts sharing costs. The out-of-pocket maximum is the total ceiling on your spending for in-network covered care in a year — deductible, copays and coinsurance all count toward it, but premiums never do.
- Does coinsurance apply before or after the deductible?
- After. You pay the full negotiated cost of care until the deductible is met, then coinsurance splits further costs — typically 20% to you and 80% to the plan — until your payments reach the out-of-pocket maximum, after which the plan pays everything.
- Do premiums count toward the out-of-pocket maximum?
- No. Premiums are the cost of having coverage and sit outside the maximum entirely. Only deductibles, copays and coinsurance for covered in-network services count, which is why the worst-case figure is the premium plus the maximum rather than the maximum alone.