How to Choose a Health Insurance Plan at Open Enrollment

You get two to four weeks, a benefits portal that lists plans by premium, and a decision worth thousands of dollars that you will live with for twelve months.

So most people sort by the smallest number on the payslip and pick the top row. That is the right answer in exactly one kind of year — the kind where you barely use the plan.

Here is what the arithmetic actually looks like, worked through for a family of four choosing between three real-shaped plans. The numbers below are all computed, not illustrative, and you can reproduce every one of them.

A Premium Is Not a Price

A health plan charges you in four places, and the portal only shows you the first:

1. Premium — what you pay to hold the card, whether you use it or not.
2. Copays — fixed amounts per visit or per prescription, on plans that have them.
3. Deductible — what you pay in full before the plan starts sharing.
4. Coinsurance — your share after the deductible, until you hit the out-of-pocket maximum.

The true annual cost of a plan is all four added together, with the last two capped at the out-of-pocket maximum:

Total = net annual premium + min(out-of-pocket max, copays + deductible-and-coinsurance)

And the fifth number nobody puts in the portal: any HSA or HRA money your employer contributes. That is real cash that lands in your account, and it nets straight off the premium. Leaving it out is one of the most common ways people pick the wrong plan.

The Three Plans

On premium alone the ranking is obvious: HDHP, then HMO, then PPO. Hold that thought.

Step One: Estimate Three Years, Not One

The single biggest improvement you can make over a premium comparison is to stop asking “what will next year cost?” and start asking “what will next year cost if it goes well, if it goes normally, and if it goes badly?”

You are not trying to predict. You are trying to see whether the ranking is stable.

Two things that trip people up here:

• Count the whole household, not just yourself. A family of four sees a doctor considerably more often than one person does.
• Pull preventive care out separately. Every ACA-compliant plan, high-deductible ones included, covers in-network preventive care at 100% before the deductible. Annual physicals, screenings and well-child visits do not run through the deductible on any of these plans, and leaving them in overstates every plan equally but overstates the high-deductible one most.

Last year’s Explanation of Benefits statements are by far the best source for the “everything else” row. For the bad year, think one surgery or one hospital stay — not a catastrophe, just a bad Tuesday that turns into a bad quarter.

Step Two: Cost Each Plan in Each Year

Healthy year

The HDHP wins by $862. This is the year the premium comparison gets right.

Note where its $1,350 comes from: $1,200 of “everything else” plus $750 of visits, less $600 of preventive, is $1,350 of deductible-eligible charges — all of it below the $3,500 deductible, so the household pays every dollar of it.

Normal year

The ranking has inverted. The HDHP now costs $1,043 more than the HMO, and the reason is visible in one column: on the high-deductible plan, $7,100 of charges ran through the deductible, because every office visit and every prescription counts against it. On the HMO, the copays absorbed the visits and only $4,200 reached the deductible — where the first $750 is met quickly and the plan then pays 90% of the rest.

Bad year

Everyone hits their out-of-pocket maximum, so the bad year is decided almost entirely by premium plus out-of-pocket max — which is the worst case you are signing up for, and the number worth writing down before you choose anything.

The HDHP loses by $1,048. And the spread between the best and worst available choice is $2,358 — for three plans that were all sitting in the same dropdown.

Step Three: Read All Three Rows Together

Three things fall out of this table, and none of them are visible from a premium list.

The PPO is never the answer. It is not the cheapest in any of the three years, and it does not become the cheapest at any level of spending at all. A plan can be dominated — beaten everywhere by another plan on the same menu — and the only way to find out is to cost it. The full head-to-head shows why this one loses at every spending level from $0 to $30,000, which is a more common outcome than it sounds.

The real decision is between two plans, and it is a risk decision. The HDHP wins the good year by $862 and loses the other two by roughly a thousand each. That is not a cost question any more, it is a question about which year you think you are having — and what happens to you if you are wrong.

A plan that wins one scenario and loses another has a crossover point. There is a specific level of spending where the cheap premium stops paying for itself. For these two plans it sits at $2,500 of deductible-eligible charges. Below that, the HDHP is cheaper; above it, the HMO is, forever. Knowing that number turns a vague judgement into one estimate you can actually make.

Step Four: The Checks That Are Not About Money

Cost is most of the decision but it is not all of it, and the non-cost checks are the ones that ruin a year when they are skipped.

Run every regular prescription against every formulary. A drug that is tier 1 on one plan and non-formulary on another can move a household’s annual cost by more than the entire premium difference between the plans. Do this before you compare, not after.

Check your must-keep doctors are in network. On an HMO, out-of-network care may not be covered at all — the HMO in this example has no out-of-network coverage and requires a referral to see a specialist. That is a real constraint attached to the plan that wins two of three scenarios.

Read the family deductible structure. Some family plans carry an embedded individual deductible inside the family one, so a single person’s care can start being shared before the family total is met. Others are aggregate — nobody’s care is covered until the whole family deductible is satisfied. These behave very differently for a household where one person has most of the costs.

Confirm whether the deductible applies to office visits. This is the field that decides everything. A “high-deductible plan” where copays start on day one and a true HDHP where you pay full freight for a strep test are different products wearing similar names.

Step Five: Size the Tax-Advantaged Account

Only after the plan is chosen, because which account you can use depends on which plan you picked.

An HSA-eligible plan lets you contribute to a Health Savings Account — money that goes in before tax, grows untaxed, and comes out untaxed for medical costs. At a combined marginal rate of 34.65% (22% federal, 5% state, 7.65% FICA), a $4,000 contribution costs about $2,614 of take-home pay. That is a genuine and large discount on the high-deductible plan’s exposure, and it is why an HDHP can be the right answer even in a year you expect to use it.

Three traps that catch people every year:

• Employer money counts against your limit. The 2027 family HSA limit is $9,000. If your employer seeds $750, your own room is $8,250 — not $9,000.
• You cannot fund an HSA and a general-purpose Health FSA in the same year. If you move to the HDHP, a general-purpose Health FSA has to become a limited-purpose one (dental and vision only).
• A part-year HSA is prorated in a specific order. The IRS prorates the annual limit by your months of eligibility first, and employer money counts against that prorated figure. Do it the other way round and you over-contribute.

Sizing the election properly is a five-minute job that runs off the limit, your employer’s contribution and your pay frequency. If your plan is not HSA-eligible, the parallel decision is a Health FSA, and the choice between the two accounts is settled almost entirely by the plan you just picked rather than by anything about the accounts.

The Twenty-Minute Version

If you do nothing else:

1. Write down each plan’s premium × pay periods, minus employer HSA or HRA money. That is the net premium. It is not what the portal shows you.
2. Write down premium + out-of-pocket max for each plan. That is your worst case. Rank the plans by it.
3. Estimate one number: deductible-eligible charges in a normal year, from last year’s EOBs.
4. Cost each plan at that number, capped at its out-of-pocket max, and add the copays.
5. Check prescriptions and doctors against each plan before you commit.
6. Log what you chose and why — one paragraph. Next October it turns a weekend into twenty minutes, because the year’s actual spending tells you immediately whether the estimate was any good.

The one thing worth internalising: the plan with the smallest number on the payslip won one of three scenarios and lost two. It was not the wrong answer — it was the right answer to a question nobody had asked yet, which is how much care are we going to use?

Featured on ReadySheetGo

Open Enrollment & Benefits Comparison Planner — $14.99

Fifteen tabs and 1,130 working formulas, and it opens finished — the three plans, three scenarios and every figure on this page are the sample data already loaded in the file, so you can see the model running before you type anything.

Plan Comparison takes five plans side by side, copied straight off each Summary of Benefits and Coverage, and checks each one against the IRS rules for you. True Annual Cost is the engine behind the three tables above: premium plus copays plus deductible plus coinsurance, capped at the out-of-pocket maximum, costed across all three usage years with the winner highlighted. Break-Even finds the crossover in dollars, and warns you when two plans cross twice — which most comparisons get wrong.

HSA Planner holds your limit for your tier and year, what is left after employer money, the per-paycheck figure, the tax you get back and a 30-year projection that correctly stops contributions at 65. FSA Planner covers Health and Dependent Care with current limits, a forfeit warning and an eligible-expense list. Rx & Providers flags any plan that drops a drug or doctor you listed, on the comparison table and again on the dashboard. Deadlines counts down from today with a twelve-item document checklist, and Decision Log records what you chose and why, so next October takes twenty minutes.

Every 2026 and 2027 IRS and HHS figure sits on its own Limits Reference tab next to the source it came from, with the projected ones marked as projected and every cell unlocked so you can update them yourself. Works in Excel, Google Sheets, Numbers and LibreOffice. No macros, no add-ons.

Get the Open Enrollment & Benefits Comparison Planner →

More in this series

• HDHP vs PPO: how to tell which one is actually cheaper — the crossover point, and why one of these plans loses everywhere.
• How much should I contribute to my HSA per paycheck? — the limit, the employer offset, the per-paycheck figure and what it really costs you.
• HSA vs FSA: which should you elect? — the plan decides this one, not the account.
• Open enrollment mistakes that quietly cost money — eight of them, with the dollar figure attached to each.