How to Estimate Your Total Yearly Health Insurance Cost
A simple way to compare plans beyond the monthly price.
To estimate your real yearly cost, add your fixed premiums to the care you expect to use. Start with your annual premium, which is your monthly premium times 12. Then estimate your out-of-pocket spending for the year: routine visits and prescriptions through copays, plus any larger expenses that would run through your deductible and coinsurance. Cap that second number at the plan's out-of-pocket maximum, since you will never pay more than that for covered care. A low-premium, high-deductible plan can be cheaper if you rarely need care, but more expensive in a year with surgery or a hospital stay. Running this math for a healthy year and a high-need year shows your best and worst case, which compares plans far better than the monthly price alone.
Add two numbers
Estimating your real yearly cost comes down to adding two numbers: what you pay to have the plan, and what you expect to pay to use it.
Step 1: Your fixed cost
Multiply your monthly premium by 12. This is what you pay no matter what, so it is the floor of your yearly cost.
Step 2: Your expected care cost
Estimate the care you expect to use. Add up copays for routine visits and prescriptions, then add anything larger that would run through your deductible and coinsurance. Whatever total you reach, it can never exceed the plan's out-of-pocket maximum, so use that as your ceiling.
Step 3: Compare a good year and a bad year
Run the math twice: once for a healthy year with little care, and once for a high-need year that reaches the out-of-pocket maximum. The two results are your best case and worst case. Comparing those across plans tells you far more than the monthly price alone.
Frequently asked questions
What is the difference between a copay and coinsurance?
A copay is a fixed dollar amount, like $30 a visit, while coinsurance is a percentage of the cost, like 20% of the bill. Copays stay the same no matter how expensive the service is, and coinsurance grows with the price. Many plans use both, sometimes for different services.
What's the difference between a deductible and an out-of-pocket maximum?
The deductible is what you pay before the plan starts sharing costs. The out-of-pocket maximum is the most you will pay all year for covered, in-network care, after which the plan pays 100%. The deductible is the starting line; the out-of-pocket maximum is the finish line.
Does my premium count toward my deductible or out-of-pocket maximum?
No. Premiums are what you pay to have the plan, and they do not count toward either the deductible or the out-of-pocket maximum. Only your spending on covered care counts.