Healthcare Insurance · 8 min read
How to Compare Health Insurance Plans by Total Cost, Not Just the Premium
PolicyRix Team·Updated November 12, 2026
Most people choose a health plan by looking at the monthly premium, because it is the only number that is certain. But the premium is only what you pay to hold the plan. What you pay to use it depends on three other numbers, and a plan that looks cheap can become the expensive one after a single hospital visit. This guide shows a simple way to compare plans by their total yearly cost, with a worked example you can repeat with your own figures.
The four numbers that decide your cost
Every plan can be reduced to four figures. The premium is the fixed amount you pay each month. The deductible is the amount of covered care you pay in full each year before the plan starts sharing costs. Coinsurance is the percentage of each bill you keep paying after the deductible. The out-of-pocket maximum is the most you can pay in a year for covered, in-network care, after which the plan pays 100%.
Premiums do not count toward the out-of-pocket maximum. That is why the worst case for any plan is twelve premiums plus the out-of-pocket maximum.
- Premium: fixed, paid every month
- Deductible: you pay 100% of covered bills up to this amount
- Coinsurance: your percentage share after the deductible
- Out-of-pocket maximum: the yearly cap on your share
The total cost formula
Total yearly cost equals twelve monthly premiums plus your share of the bills. Your share is the bills up to the deductible, plus your coinsurance percentage of everything above the deductible, limited to the out-of-pocket maximum.
The formula is simple, but the answer changes with how much care you use. That is why one comparison is not enough. You need to run it for a light year and a heavy year.
A worked example
Take Plan A with a premium of 350 a month, a deductible of 3,000, coinsurance of 20% and an out-of-pocket maximum of 7,000. Plan B costs 480 a month, with a deductible of 750, coinsurance of 20% and an out-of-pocket maximum of 4,000. Plan A costs 4,200 a year in premiums and Plan B costs 5,760, so Plan A starts 1,560 ahead.
In a year with no care, Plan A costs 4,200 and Plan B costs 5,760. Plan A wins by 1,560. With 4,000 of bills, your share under Plan A is 3,000 plus 20% of 1,000, which is 3,200, for a total of 7,400. Under Plan B it is 750 plus 20% of 3,250, which is 1,400, for a total of 7,160. Plan B now wins by 240.
With 20,000 of bills, Plan A's share is 3,000 plus 20% of 17,000, or 6,400, giving 10,600. Plan B's share would be 750 plus 20% of 19,250, or 4,600, but the cap limits it to 4,000, giving 9,760. Plan B wins by 840. In the worst case, Plan A costs 11,200 and Plan B costs 9,760.
Find the crossover point
In the example, the plans cost the same at about 2,700 of yearly bills. Below that, the low-premium plan is cheaper. Above it, the high-premium plan is cheaper. Every pair of plans has a crossover like this, unless one plan is cheaper at every level, in which case the choice is easy.
The useful question then becomes: is my household more likely to be below or above the crossover? Someone with a chronic condition, a planned operation or a pregnancy is usually above it. Someone who rarely sees a doctor is usually below it, but should still check the worst case.
Check that you could pay the deductible
A high-deductible plan only saves money if you can pay the deductible when it is needed. If a bill of several thousand would have to go on a credit card, the interest can cancel the premium savings. A common approach is to put the premium difference into savings each month, so that the money is there if you need it. In some countries, certain high-deductible plans can be paired with a tax-advantaged health savings account, which improves the case for them.
What the four numbers leave out
The method is a good first filter, but plans differ in other ways. Many plans charge fixed copays for doctor visits and prescriptions, and some cover those services before the deductible. Family plans can have both individual and family deductibles. Care outside the plan's network may cost far more or may not be covered at all, and it often does not count toward the in-network maximum.
So after the numbers, check three things: whether your doctors and hospital are in the network, whether your regular medicines are on the plan's drug list and at what tier, and how the plan treats the services you expect to use.
A five-step routine
The whole comparison takes about fifteen minutes per pair of plans.
- Collect the four numbers from each plan's official summary
- Estimate bills for a normal year and a bad year
- Calculate the total cost of each plan in both years
- Note the crossover point and the worst case
- Confirm network, medicines and your ability to pay the deductible
Key takeaways
- Compare plans by total yearly cost: premiums plus your share of bills.
- The worst case for any plan is twelve premiums plus the out-of-pocket maximum.
- Low-premium plans usually win in healthy years and lose in heavy ones.
- Find the crossover level of bills and ask which side of it you are likely to be on.
- Numbers come first, then check the network and the drug list.
Frequently asked questions
Do premiums count toward the out-of-pocket maximum?
No. The out-of-pocket maximum only limits your share of covered medical bills. Premiums are paid on top of it.
Is the plan with the lowest deductible always the safest?
Not necessarily. The out-of-pocket maximum sets the worst case, so compare premiums plus that maximum for each plan.
What if I cannot predict my medical bills?
Run the comparison for a year with no care and a year that reaches the out-of-pocket maximum. Those two results bound every other outcome.
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