The True Cost of a Health Plan

The cheapest premium is often not the cheapest plan, and the plan with the lowest deductible is often not either. What you actually pay in a year is premiums plus whatever care costs you, minus any money your employer puts in a health account and any tax you save. This chapter shows how to estimate that total for the year you expect, for a quiet year and for a bad one, so you can compare plans on what they would really cost you rather than on the number printed at the top.

The one formula behind every comparison

For any plan, a year costs:

Total cost = the year's premiums + your out-of-pocket spending on care − employer money in an HSA or HRA − tax saved on money you put aside for care.

Premiums are certain. Out-of-pocket spending depends on how much care you use, which is why one estimate is not enough. Work out three:

• A quiet year. Preventive care only, perhaps a prescription. This shows what the plan costs if nothing goes wrong.
• Your expected year. The care you used last year, adjusted for anything you already know is coming: a planned surgery, a pregnancy, a new prescription, a child starting orthodontics.
• A bad year. You reach the out-of-pocket maximum. Total cost is then the year's premiums plus that maximum, as long as your care stays in network and covered.

The bad-year figure is easy to compute and often decisive. For 2026 no HSA-eligible plan may have an in-network out-of-pocket maximum above $8,500 for one person or $17,000 for a family, and no non-grandfathered plan of any kind may go above $10,600 or $21,200. Your plan's own limit may be much lower.

Estimating the year you expect

The best predictor of next year's care is last year's. Your insurer's member portal lists every claim with its Explanation of Benefits, showing the negotiated price and what you paid. Add up three things: how many office visits and of what kind, every prescription with its monthly cost, and any one-off events such as imaging, a procedure or an emergency visit.

Then translate that into each plan's terms. Visits and generic drugs with copays are simple. For services subject to the deductible and coinsurance, use the negotiated prices from your claims: you pay everything up to the deductible, then your coinsurance share of the rest, until the out-of-pocket maximum. Check each plan's drug list (the formulary) for your prescriptions, because a drug on a high tier in one plan and a low tier in another can outweigh every other difference.

If you have no history, the coverage examples in each plan's Summary of Benefits and Coverage give a standard comparison for three common situations.

Weighing a lower premium against a higher deductible

Most comparisons come down to one trade: a plan with a lower premium and a higher deductible, often a high-deductible plan with a Health Savings Account, against a plan with a higher premium and lower cost at the point of care.

Start with what the lower premium is worth over a year. Suppose the high-deductible plan's share of the premium taken from your pay is lower by a fixed amount each month.

A premium that is $150 a month lower is worth $1,800 over the year. That is money you keep whether or not you are sick. Many employers also put money into the HSA of employees who choose the high-deductible plan.

With an employer deposit of $750 on top, the plan leaves you $2,550 ahead before any care is used. Now compare that figure with how much more you could pay for care under the higher deductible, in each of the three years:

• In a quiet year, the high-deductible plan almost always wins, because you keep the whole advantage.
• In your expected year, it wins as long as the extra you pay before its deductible is met is less than the advantage.
• In a bad year, compare premiums plus the out-of-pocket maximum for each plan. The high-deductible plan can still win if its maximum is not much higher than the other plan's, because its premiums were lower all year.

Taxes tilt the comparison further. Money you put into an HSA through payroll avoids income tax and usually Social Security and Medicare tax, so each dollar of care paid from it costs you less than a dollar. Chapter 3 shows the size of that saving.

The HDHP vs PPO calculator runs this whole comparison for a range of care costs, including the employer deposit and the tax saving.

Copays versus coinsurance

Copays make routine care predictable: the same amount for every visit, whatever the visit is priced at. Coinsurance moves with the price, so it can be cheap for a low-priced service and expensive for a costly one until the out-of-pocket maximum stops it.

Two plans with the same deductible can feel very different in practice. A plan with copays for visits and drugs before the deductible suits someone with frequent, routine care. A plan where everything goes through the deductible and then coinsurance suits someone who uses little care but wants a firm ceiling. In a high-deductible plan, federal rules generally require you to pay the full negotiated price for non-preventive care until the deductible is met, so copays only start after it.

Having the cash for the deductible

A high deductible only works if you can pay it when it arrives. A bill that lands on a credit card turns an insurance saving into interest, as chapter 6 shows. Before choosing a high-deductible plan, check that your cash reserve, or your HSA balance, could cover at least the deductible, and ideally the out-of-pocket maximum.

If the cash is not there yet, it can be built from the premium saving itself.

Setting aside $250 a month in an account earning 4.0% builds $3,055 in a year. Inside an HSA the same money would also go in before tax. Until the reserve covers the deductible, a plan with a lower deductible may be the safer choice even if it costs more on paper, because it limits what any single bill can do to your budget. The emergency fund calculator shows how your whole cash reserve compares with your monthly costs.

What the arithmetic leaves out

A plan can win on cost and still be wrong for you. Before deciding, check that your doctors and hospital are in network, that your prescriptions are on the formulary at a tier you can live with, and whether the plan needs referrals or prior approval for care you use. Out-of-network care, uncovered services and drug exclusions sit outside the out-of-pocket maximum, so a cheap plan with a narrow network can cost more than any of the three scenarios suggest.