Transparent method
The formula
Worked example
Example inputs
How to interpret the result
A plan with a lower premium and a plan with a higher premium can cost the identical household the same total amount in a bad year, or very different amounts, depending entirely on how much care actually gets used. Comparing plans by premium alone ignores the cost-sharing side of the equation that only shows up once claims start happening.
Before you rely on it
What to check
Compare both plans under the same assumed care scenario, light usage and heavy usage both, rather than comparing premiums alone.
The common error
Where people go wrong with health insurance plan cost calculator
Choosing a health plan based on the lower monthly premium without modeling a heavier-usage scenario. The plan with the higher premium and lower cost-sharing can end up cheaper overall in a year with significant care needs.
Sensitivity evidence
How monthly premium changes the expected annual plan cost
| Monthly premium | Expected annual plan cost | Worst-case annual cost |
|---|---|---|
| $360 | $6,920 | $11,320 |
| $405 | $7,460 | $11,860 |
| $450worked example | $8,000 | $12,400 |
| $495 | $8,540 | $12,940 |
| $540 | $9,080 | $13,480 |
Every input, tested
Which input moves the expected annual plan cost most
| Input | Tested from | To | Expected annual plan cost at each end | Swing |
|---|---|---|---|---|
| Monthly premium | $405 | $495 | $7,460 to $8,540 | $1,080 (14%) |
| Annual deductible | $1,800 | $2,200 | $7,840 to $8,160 | $320 (4.0%) |
| Expected eligible medical spending | $4,500 | $5,500 | $7,900 to $8,100 | $200 (2.5%) |
| Coinsurance after deductible | 18.0% | 22.0% | $7,940 to $8,060 | $120 (1.5%) |
| Out-of-pocket maximum | $6,300 | $7,700 | $8,000 to $8,000 | none |
Two variables at once
Expected annual plan cost by monthly premium and expected eligible medical spending
| Monthly premium \ Expected eligible medical spending | $4,000 | $5,000 | $6,000 |
|---|---|---|---|
| $360 | $6,720 | $6,920 | $7,120 |
| $405 | $7,260 | $7,460 | $7,660 |
| $450 | $7,800 | $8,000 | $8,200 |
| $495 | $8,340 | $8,540 | $8,740 |
| $540 | $8,880 | $9,080 | $9,280 |
Step by step
The worked example, input by input
| Input | Value used |
|---|---|
| Monthly premium | $450 |
| Expected eligible medical spending | $5,000 |
| Annual deductible | $2,000 |
| Coinsurance after deductible | 20.0% |
| Out-of-pocket maximum | $7,000 |
| Expected annual plan cost | $8,000 |
| Worst-case annual cost | $12,400 |
Where the inputs come from
Monthly premium is what you pay each month for the plan, expected eligible medical spending is your best estimate of covered care for the year, annual deductible is what you pay before insurance begins to share costs, coinsurance is your percentage after the deductible, and the out-of-pocket maximum caps your yearly spending. Use last year's medical bills as a guide, and consider planned care such as a surgery or a pregnancy. Copays for office visits and drugs are not modeled here, so add them.
Using the expected annual plan cost in a real decision
Run it for each plan you can choose between: a lower premium with a high deductible wins in a healthy year and loses in a bad one, so compare both the expected and worst-case cost.
When the result stops applying
Real plans have copays, networks and separate rules for prescriptions, and using out-of-network care can cost far more. Premium tax credits, employer contributions to an HSA and tax savings change the comparison. Medical spending is unpredictable, so expected cost is only an estimate. Plan details are in the summary of benefits and coverage.
What to compare it with
See the tax side on the HSA and FSA calculators, and the emergency fund page to plan for the out-of-pocket maximum. The retirement healthcare and early retirement insurance pages cover longer-term costs. Check that your doctors and drugs are covered before choosing a plan.
People also ask
Frequently asked questions
What is an out-of-pocket maximum?
The most you pay in a year for covered in-network care, after which the plan pays 100%. Premiums do not count toward it.
How do I choose between a high-deductible and a low-deductible plan?
Estimate your likely medical spending and compare total cost, premiums included, and consider whether you could afford the deductible in a bad year.
Do premiums count toward the deductible?
No. Premiums are what you pay for coverage, and the deductible is what you pay for care before the plan begins sharing costs.