Why premiums don’t tell the whole story
A monthly premium is easy to see, but it’s only one piece of your cost picture. Two plans with the same premium can leave you with very different annual bills depending on deductibles, copays, coinsurance, and whether your doctors are in‑network. In my practice I’ve seen clients choose the lowest premium and end up paying far more during the year because of a high deductible or limited network access.
Core factors to evaluate (and why they matter)
- Premium — The fixed monthly fee for coverage. Important, but not decisive.
- Deductible — The amount you must pay for covered services before most benefits begin. A high deductible can shift early-year costs to you.
- Copays and coinsurance — Copays are fixed fees (e.g., $25 per primary care visit); coinsurance is a percentage you pay after the deductible (e.g., 20%). Both affect per-visit and per-procedure costs.
- Out‑of‑pocket maximum — The annual cap on what you’ll pay for covered services. Once reached, the plan pays 100% of covered services for the remainder of the plan year. This protects against catastrophic costs.
- Provider network — Whether your doctors, specialists, and hospitals are in‑network. Going out‑of‑network can mean much higher costs or no coverage at all.
- Prescription drug coverage (formulary and tiers) — Check whether essential medications are covered and in which tier; specialty drugs often carry much higher cost‑sharing.
- Covered services and exclusions — Some plans limit or exclude services (e.g., physical therapy, certain mental health treatments, or fertility services).
- Prior authorization and step therapy rules — Plans may require approval or preferred therapy sequencing before paying for care; these rules can delay care or increase your out‑of‑pocket spending.
- Eligibility and enrollment windows — Employer plans, the ACA Marketplace, Medicaid, and Medicare each have different rules and special enrollment triggers.
(Authoritative sources: HealthCare.gov and CMS provide enrollment and coverage basics.)
HealthCare.gov: https://www.healthcare.gov/
CMS: https://www.cms.gov/
A practical way to estimate total annual cost
1) Project expected care use. List likely visits, prescriptions, and procedures for the year. For someone with a chronic condition include regular doctor visits, labs, and maintenance drugs.
2) Calculate premium cost: monthly premium × 12.
3) Estimate out‑of‑pocket spending before the deductible and after: add expected copays, coinsurance on likely procedures, and expected prescription costs. If you expect to exceed the deductible, calculate coinsurance on the portion above the deductible until you reach the out‑of‑pocket maximum.
4) Add premiums and estimated out‑of‑pocket spending to get a projected annual cost for each plan.
Example (rounded):
- Plan A: $150/month premium = $1,800/year, $2,000 deductible, 20% coinsurance, $6,000 OOP max.
- Projected year: 6 PCP visits ($25 copay each = $150), one outpatient procedure costing $3,000 (you pay $2,000 deductible + 20% of remaining $1,000 = $200), prescriptions $600.
- Estimated OOP = $150 + $2,200 + $600 = $2,950.
- Total cost = $1,800 + $2,950 = $4,750.
Run the same calculation for each plan you’re comparing. This simple arithmetic often reveals that a higher premium plan can be cheaper overall.
When networks change the math
If a plan’s network doesn’t include your primary care doctor or a needed specialist, you may face higher copays or full price for out‑of‑network care. Before picking a plan, confirm your providers are in the network and verify whether referrals are required for specialists. If you rely on a specific hospital or specialist, that should weigh heavily in your choice. (See our deeper guide on how networks affect bills: How Health Insurance Networks Affect Your Medical Bills.)
Prescription coverage matters—check the formulary
Look up each plan’s drug formulary and note the tier for your medications. Even a small difference in tiering can change your annual drug costs significantly. Also check for mail‑order options and whether the plan requires prior authorization for certain medications.
Special categories: HDHPs and HSAs
High‑deductible health plans (HDHPs) usually have lower premiums and must meet federal rules to qualify for Health Savings Accounts (HSAs). If you or a family member are generally healthy and can cover the deductible if needed, pairing an HDHP with an HSA can be tax‑efficient. For details on how HSA-compatible plans work, see How Health Savings Accounts Work with High-Deductible Plans.
Employer plans vs. Marketplace vs. Medicare
- Employer plans may subsidize premiums, offer multiple tiers, and coordinate with other workplace benefits (flexible spending accounts, wellness programs). If comparing spouse’s employer plans, compare combined household costs—not just your portion of the premium.
- Marketplace plans may include premium tax credits if your income qualifies; use the Marketplace calculator to see net premiums after credits (HealthCare.gov).
- Medicare has its own structure (Parts A, B, C/Advantage, D and Medigap). If you’re approaching Medicare, consider timing and enrollment penalties; wrong timing can cause late‑enrollment penalties.
Behavioral and lifestyle considerations
- If you anticipate pregnancy, planned surgery, or starting a medication, choose a plan that lowers your expected out‑of‑pocket during that period.
- If you travel frequently, check whether the plan covers care outside your home area and under what terms.
Common mistakes I see clients make
- Choosing solely on lowest premium. This ignores deductibles, coinsurance, formularies, and network coverage.
- Not verifying that a preferred specialist or hospital is in‑network.
- Forgetting to factor in tax credits or employer contributions to HSAs.
- Overlooking limits on covered services (e.g., physical therapy visit caps or mental health session limits).
A short checklist to use while comparing plans
- List your expected health services and prescriptions for the next 12 months.
- Multiply each plan’s premium by 12.
- Calculate expected deductible, copays, and coinsurance costs for that usage.
- Add premiums + expected OOP; compare totals.
- Confirm providers and hospitals are in‑network.
- Review the drug formulary for your medications.
- Check for prior‑authorization requirements and referral rules.
- Consider whether an HSA-compatible plan makes sense for you.
When to get professional help
If you have complex health needs, multiple prescriptions, or expect a major medical event, consider consulting an insurance broker or a licensed benefits advisor. In my experience, paying a small professional fee or using employer‑provided counseling during open enrollment often saves far more than the cost in reduced surprise bills and better coverage.
Bottom line
Comparing health plans is an exercise in scenario‑testing: estimate your likely healthcare use, calculate total annual costs (premiums plus expected out‑of‑pocket expenses), and check networks and drug coverage. That process will usually point to the plan that minimizes both risk and expected cost for your situation.
Note: This article is educational and does not constitute personalized financial or insurance advice. For plan‑specific details and enrollment, consult HealthCare.gov or the plan documents and consider speaking with a licensed insurance advisor. (HealthCare.gov: https://www.healthcare.gov/; CMS: https://www.cms.gov/)
Related reading:
- How Health Savings Accounts Work with High-Deductible Plans: https://finhelp.io/glossary/how-health-savings-accounts-work-with-high-deductible-plans/
- How Health Insurance Networks Affect Your Medical Bills: https://finhelp.io/glossary/how-health-insurance-networks-affect-your-medical-bills/
- When to Choose a High-Deductible Health Plan: https://finhelp.io/glossary/when-to-choose-a-high-deductible-health-plan-a-decision-guide/
Professional disclaimer: The information here is accurate as of 2025 and intended for educational purposes only. Individual plan terms and federal or state rules change; consult official plan documents, HealthCare.gov, CMS guidance, or a licensed advisor for decisions tailored to your situation.
