How to Compare Health Insurance Plans the Right Way

By Andrew Ullmann · Last updated August 25, 2026

Don't compare premiums, compare total yearly cost. For each plan, add twelve months of premiums to what you'd pay for care in three scenarios: a light year, a moderate year, and a bad year (a bad year being one where you hit the out-of-pocket maximum). Then check your doctors, your medications, and the referral rules for expected use and cost. The whole job takes about 30 minutes.

The classic mistake: picking by the premium or the metal (e.g. Bronze, Silver, Gold plan)

The premium - the amount you pay every month whether or not you see a doctor - is the most advertised number on any plan. It's also the second least informative one on its own. Which means (you guessed it) the metal tier is arguably the LEAST informative.

What a plan actually costs you is set by four numbers working together:

Premium - the fixed monthly payment. You pay it in a healthy year and a terrible year alike.
Deductible - what you pay out of your own pocket for most care before the plan starts sharing the bill.
Copays and coinsurance - your share after that. A copay is a flat fee (say, $30 per visit). Coinsurance is a percentage of the bill (say, you pay 20%).
Out-of-pocket maximum - the yearly ceiling on what you pay for covered, in-network care. Once you hit it, the plan pays the rest. Premiums don't count toward it.

A low premium almost always buys a high deductible and a high out-of-pocket maximum. You're not paying less. You're moving the payment from "every month, guaranteed" to "later, if something happens."

What does a health plan actually cost?

The formula is pretty simple: total yearly cost = (premium × 12) + what you pay for care under that plan's rules.

The first half is fixed and printed in big type. The second half depends on the kind of year you end up having and you can't know that in advance. So don't guess.

The three-scenario method

For each plan you're considering, price out the year with the following three scenarios. Every cost-sharing number you need is on the plan's Summary of Benefits and Coverage (SBC), a standardized document every plan must provide. The one number the SBC leaves out is the premium; pull that from your enrollment page or marketplace listing.

The light year. One preventive checkup, nothing else. ACA-compliant plans cover a defined list of preventive services at no cost in-network, even before you've met the deductible. So a light year costs roughly your premiums and nothing more.
The moderate year. A couple of sick visits, a monthly generic prescription, one urgent-care trip. Price each item under each plan's rules.
The bad year. An appendix bursts, a bad ski landing sends you to the ER, a new diagnosis. Assume you hit the out-of-pocket maximum: calculate the year cost in premiums plus the out-of-pocket max.

Here's the method run on two made-up plans. (Every number below is a hypothetical example invented to show the math - not a quote from any real plan.)

	Plan A - "the cheap one"	Plan B - "the expensive one"
Monthly premium	$200	$425
Deductible	$7,000	$1,000
Sick visit	Full price until deductible	$30 copay
Generic prescription	Full price until deductible	$15 copay
Urgent care	Full price until deductible	$75 copay
Out-of-pocket maximum	$9,000	$4,000

Now put a person in it. In this case we are going to model a moderate year for Priya with two sick visits at $150 each, a $20-a-month generic, and one $200 urgent-care trip - $740 of care at negotiated prices.

Scenario	Plan A: year total	Plan B: year total	Who wins
Light year (one free preventive visit)	$2,400	$5,100	Plan A by $2,700
Moderate year ($740 of care)	$2,400 + $740 = $3,140	$5,100 + $315 = $5,415	Plan A by $2,275
Bad year (hit the out-of-pocket max)	$2,400 + $9,000 = $11,400	$5,100 + $4,000 = $9,100	Plan B by $2,300

Same two plans. Different scenarios. Different winners. Three things to notice:

The "cheap" plan wins the light year comfortably - and loses the bad year badly.
The moderate-year gap is narrower than it looks. Swap that generic for a brand-name drug, or add an MRI, and the middle scenario can flip on its own.
The bad-year number is your real risk. It's the most a year of covered, in-network care can cost you. NOTE: Out-of-network care and non-covered services can still go beyond it. If that number would wreck you, the low premium isn't cheap; it's a loan you repay in your worst month. The mechanics of how you get there are here: deductible, coinsurance, and out-of-pocket max, explained.

To make the moderate year your moderate year, don't guess. Pull last year's EOBs - the statements your insurer sends after each claim (how to read one) - and count what your household actually used.

Which checks can veto a plan before any math?

Three, and any one of them can disqualify a plan that wins on numbers:

Your doctors. Look each one up in the plan's online directory, then call the office and ask: "Do you take [plan name], [network name]?" Ask about the specific network, not just the insurance company - the same insurer can run several networks, and directories go stale. The office's answer is the one that counts.
Your medications. Every plan has a formulary - its list of covered drugs, sorted into pricing tiers. Look up each prescription you fill regularly: is it on the list, and at what tier? A drug on a high tier (or off the list entirely) can cost more than the entire premium difference between two plans.
Referral and network rules. An HMO (health maintenance organization) usually requires a referral from your primary doctor to see a specialist, and covers little or nothing out-of-network beyond emergencies. A PPO (preferred provider organization) lets you book specialists directly and pays part of out-of-network care. Neither is wrong, but if you see specialists often or split time between two cities, the rules matter as much as the price.

The fine print that bites

Worth sixty seconds each in the plan documents:

Embedded vs. aggregate family deductibles. Embedded means each family member has their own smaller deductible inside the family total. This means one sick kid reaches cost-sharing early. Aggregate (non-embedded) means the plan only shares costs after the whole family's combined spending hits the full family deductible. Same headline number, very different bad year.
A separate drug deductible. Some plans make you meet a second deductible before prescription coverage starts. If you take anything regularly, this quietly rewrites your moderate year.
Prior authorization. This is care the plan must approve in advance. Every plan has it. A plan that requires prior authorization for routine imaging, therapy, or a prescription you already take adds friction and denial risk to care you already know you need.
Out-of-network "coverage" that isn't. If a plan advertises out-of-network benefits, check the separate out-of-network deductible and maximum. Sometimes they're high enough that the coverage is theoretical.

Choosing between employer plans? Two wrinkles change the math

Spousal surcharge. Some employers charge extra to cover a spouse who could get insurance at their own job. That's a premium increase you should add to that plan's monthly line before you compare.
Employer HSA or FSA money. Many employers contribute to employees' HSAs (health savings accounts, which come with qualifying high-deductible plans) or FSAs. That's real money that pays real medical bills - subtract it from that plan's yearly total. If one of your options is a high-deductible plan, the HSA changes the comparison enough that we gave it its own article.

One more thing before you switch anything: know what you actually have. People drop plans with benefits they never knew existed. Here's how to find out what your current plan covers before you trade it away.

The 30-minute open-enrollment checklist

Download the SBC for every plan you're considering.
Write the four numbers side by side: premium × 12, deductible, copays/coinsurance, out-of-pocket max. Add any spousal surcharge; subtract any employer HSA/FSA money.
Compute the light year for each plan: premiums only.
Compute your moderate year: last year's visits, prescriptions, and urgent-care trips, priced under each plan's rules.
Compute the bad year: premiums + out-of-pocket max. Cross out any plan whose bad year you couldn't absorb.
Check every doctor your family actually sees - directory first, then call the ones you can't lose.
Check every regular prescription against each plan's formulary and note the tier.
Bonus: Check for any specific benefits you know you need (e.g. network maternity care if you plan on having a baby)
Note the veto rules: referrals required? Out-of-network covered at all?
Scan the fine print: aggregate family deductible, separate drug deductible, prior authorization on anything you already use.
Pick the plan with the best likely-year number whose bad-year number you can live with - not the one with the prettiest premium.

The fastest free way to do all of this

Everything in this guide you can do yourself with a spreadsheet - that's why we wrote it down. Candid builds the spreadsheet for you, for free. It makes it easy to find the right plan for you. Just upload your plan documents and it pulls all the data you need from your SBC, lays the 4 numbers above and all benefits side by side, and models your light, moderate, and bad years (the same three scenarios this guide walks through).

Candid is our tool - this guide is complete without it. It just turns an afternoon of fine print into a few minutes.

FAQ

What is the most important number when comparing health plans?

If you only look at one, look at the out-of-pocket maximum - the ceiling on what a year of covered, in-network care can cost you. It's the number that decides whether a bad year is painful or catastrophic. But no single number is enough, which is why the three-scenario method above prices each plan across a light, moderate, and bad year.

Is the plan with the cheapest premium ever the right choice?

Often, yes. If your realistic years look light, your doctors are in-network, and you could absorb the out-of-pocket maximum without borrowing, the low-premium plan can be the rational pick. It's the right choice when you've priced the bad year and accepted it. Not when you never looked.

How do I check whether my doctor takes a plan?

Through your doctor! Look the doctor up in the plan's online directory, then call the office and ask whether they accept that specific plan and network - directories are often out of date, and one insurer can operate several networks. Do this before you enroll, not after.

What's the difference between an HMO, a PPO, and an EPO?

An HMO requires specialist referrals and generally covers only in-network care. A PPO skips referrals and pays part of out-of-network care. An EPO (exclusive provider organization) sits in between: no referrals, but typically no out-of-network coverage except emergencies. The label changes the rules and the price - not the quality of the care itself.

Should I just pick based on what I spent last year?

Last year is your best estimate for the moderate scenario, so start there. But the whole point of insurance is the year that doesn't look like last year. That is why you price the bad year separately. If two plans are close on your likely year, let the bad-year number break the tie.

This guide is general information about health insurance - not legal, medical, tax, or financial advice.