First published: 25 September 2026
Concept: what it measures
Choosing between health plans purely by comparing premiums hides the real cost of a plan, because the premium is only the price of admission — the deductible or excess, coinsurance, copays, and the annual out-of-pocket maximum determine what a household actually pays the moment someone gets sick. This calculator forces those numbers into one comparable figure per plan, so a cheaper monthly premium doesn't quietly hide a far more expensive bad year.
The formula
Out-of-Pocket Exposure = Annual premium + Deductible/excess paid before coverage begins + (Coinsurance % × estimated treatment cost above the deductible, capped at the plan's out-of-pocket maximum) + Expected annual copays for routine care
Run it twice per comparison: once assuming a low-utilization year (routine care only) and once assuming a high-utilization year (a major medical event), since the plan that wins on one scenario often loses on the other.
Decision rule: the lower-premium plan is only the better choice if its high-utilization exposure figure is close to, or lower than, the competing plan's — otherwise the premium saving is being funded by real risk the household is carrying unpriced.
US Worked Example
Consider the Alvarez household in Austin, Texas, choosing between an employer's High-Deductible Health Plan (HDHP) and a PPO for the coming plan year.
HDHP:
- Annual premium: $2,400
- Deductible: $3,500 (family)
- Coinsurance after deductible: 20%, out-of-pocket maximum $6,000
- Low-utilization year: $2,400 premium + ~$400 routine copays = $2,800
- High-utilization year (a $20,000 medical event): $2,400 premium + $3,500 deductible + $6,000 out-of-pocket cap already includes the deductible, so total exposure caps at $2,400 + $6,000 = $8,400
PPO:
- Annual premium: $6,600
- Deductible: $1,000 (family)
- Coinsurance after deductible: 20%, out-of-pocket maximum $4,500
- Low-utilization year: $6,600 premium + ~$200 routine copays = $6,800
- High-utilization year: $6,600 + $4,500 out-of-pocket cap = $11,100
The HDHP wins in both scenarios here — $2,800 vs. $6,800 in a quiet year, and $8,400 vs. $11,100 even in a bad one — which only becomes visible once both years are run through the same formula rather than comparing premiums alone. The HDHP only becomes the wrong choice if the family also qualifies for and fully funds a Health Savings Account, since pre-tax HSA contributions change the effective cost on the HDHP side further in its favor.
UK Worked Example
Consider the Osei household in Bristol, deciding whether to buy private medical insurance (PMI) alongside NHS care, and choosing between two PMI excess levels.
PMI with £0 excess:
- Annual premium: £1,850
- Excess: £0
- Low-utilization year: £1,850
- High-utilization year (a £15,000 private treatment episode): £1,850 (no excess to add)
PMI with £500 excess:
- Annual premium: £1,240
- Excess: £500 per claim year
- Low-utilization year: £1,240 (excess never triggered)
- High-utilization year: £1,240 + £500 excess = £1,740
Here the £500-excess policy wins in both scenarios, and the gap barely narrows even in a bad year, because UK PMI excess levels are capped per claim year rather than scaling with treatment cost the way US coinsurance does. The calculation should also note explicitly that the NHS remains available throughout as free-at-point-of-use backup regardless of which PMI excess is chosen — unlike the US comparison, where declining both employer plans typically means no fallback coverage at all.
How to use it
Pull the deductible/excess, coinsurance percentage, and out-of-pocket maximum directly from each plan's summary of benefits rather than estimating them, and run both the low- and high-utilization scenarios before enrolling or renewing — open enrollment in the US and PMI renewal in the UK are the two moments this calculation matters most.
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