How to Choose a Health Plan Without Guessing

Premium is one of four numbers, and not the most important

Every plan has four figures that determine what it costs you: the premium, the deductible, the coinsurance percentage after the deductible, and the out-of-pocket maximum. Comparing on premium alone is like comparing cars on fuel efficiency and ignoring the purchase price.

The total cost of a plan is the premium paid whether you use it or not, plus whatever you pay toward care, capped at the out-of-pocket maximum. That is a single number, and it is calculable.

Find the crossover point

Plot two plans against annual medical spend and the lines cross. Below the crossover, the plan with the lower premium and higher deductible costs less. Above it, the plan with the higher premium and lower deductible costs less.

That crossover is the entire decision. It tells you exactly how much care you would have to use before your choice becomes the wrong one. If your realistic spending sits comfortably on one side of it, the choice is straightforward. If it sits close to the line, choose based on which mistake you could better absorb.

Estimate your spend from claims, not from how you feel

The most common error is estimating medical spend from a general sense of being healthy. Pull last year's actual claims from your insurer's portal instead. Include everything: routine visits, prescriptions, imaging, therapy, dental if it is bundled.

Then adjust for anything known and upcoming — a planned procedure, a pregnancy, a new prescription. Known events change the answer completely and are the one thing a spreadsheet cannot infer.

The out-of-pocket maximum is the number to check twice

It caps what you pay for in-network care in a year. Once you reach it, the plan pays everything else covered. It is the difference between a bad year that is expensive and a bad year that is financially catastrophic.

Compare the worst case of each plan — premiums for the year plus the out-of-pocket maximum — alongside the expected case. A high-deductible plan usually wins in a healthy year and loses badly in a bad one, which is exactly the year you can least absorb it.

Check the network before anything else

Networks change annually. A doctor or hospital that was in network last year may not be this year, and out-of-network care is either partially covered or not covered at all depending on the plan type.

Verify each provider you actually use, by name, on the plan's current directory — and ideally by calling the provider as well, because directories are frequently out of date. For a hospital, check that the facility and the physician groups working inside it are both in network, since they are often contracted separately.

The formulary can outweigh everything else

If you take a regular medication, find it on each plan's formulary and note its tier. The difference between a tier 2 and a tier 4 placement on a single specialty drug can be thousands of dollars a year — more than every other difference between the two plans combined.

Also check whether the plan requires step therapy or prior authorisation for it, which affects access as well as cost.

Health savings accounts change the arithmetic

A high-deductible plan may come with a health savings account, and an employer contribution to it is real money attached to one specific plan. Subtract it from that plan's cost when comparing.

Your own contributions are tax-advantaged, which lowers the effective cost further. The account is also yours permanently, unlike a flexible spending account with a use-it-or-lose-it rule. For someone with low expected spend and the cash flow to absorb a deductible, that combination is genuinely valuable.

Get authorisations in writing

For any significant planned treatment, obtain prior authorisation in writing before it happens. A verbal confirmation from a call centre is routinely disputed once the bill arrives, and by then you have already received the care.

Keep the authorisation reference, the date, and the name of who provided it. If a claim is later denied, that document is the entire basis of the appeal.

Do this before open enrolment closes

Pull last year's claims total. List your providers and prescriptions. Get the four numbers for each plan on offer. Calculate total cost at your expected spend and at your worst case. Check the network and formulary for anything you actually use.

That is roughly an hour of work, once a year, on a decision that commonly swings several thousand dollars. Missing the enrolment window usually means living with the wrong answer for twelve months.

Run your own numbers

The figures above describe the method. This is the same method with your inputs in it — change anything and the result updates immediately.

Common questions