Open Enrollment Math: Compare Health Plans by Total Yearly Cost

Plan A costs you $150 a month. Plan B costs $60. On premiums alone, Plan B saves $1,080 a year, and many people stop the comparison right there. But if you have a moderately expensive year, with an MRI, a specialist, and some physical therapy, Plan A can end up about $220 cheaper. If you have a major surgery, Plan A can come out about $1,900 cheaper. And if you add the tax savings from a health savings account, the answer can flip back again. The premium is only one of several numbers that determine what a health plan really costs you.

This guide shows you how to compare workplace health plans during open enrollment by total yearly cost, using a simple formula and worked scenarios for a light, moderate, and heavy year of care. It also includes the official 2027 limits for health savings accounts (HSAs) and HSA-eligible high-deductible health plans (HDHPs), since most open enrollment choices made this fall apply to 2027 coverage. The plans in the examples are hypothetical, so plug in your own employer's numbers.

The formula that replaces premium shopping

For each plan, estimate your total yearly cost this way: your share of annual premiums, plus your expected out-of-pocket costs for care (deductible, copays, and coinsurance), minus any money your employer puts into an HSA or health reimbursement arrangement (HRA) for you, minus the tax savings from your own HSA or flexible spending account (FSA) contributions.

Then run the formula for at least three levels of care: a light year, a moderate year, and a bad year where you hit the out-of-pocket maximum. The plan that wins in the year you consider most likely, without being unaffordable in the bad year, is usually the right choice.

Gather five numbers from each plan

You need the per-paycheck premium for the coverage tier you will choose (employee only, employee plus spouse, employee plus children, or family), the deductible, the coinsurance percentage after the deductible, the copays for common services, and the out-of-pocket maximum. Also note any employer HSA or HRA contribution. All of this appears in each plan's Summary of Benefits and Coverage, a standardized document that employers and insurers must provide, which makes side-by-side comparisons much easier.

For the examples below, here are two hypothetical employee-only plans for 2027. Plan A is a PPO with a $150 monthly premium ($1,800 a year), a $750 deductible, 20% coinsurance after the deductible, a $30 copay for primary care visits, and a $3,500 out-of-pocket maximum. Plan B is an HSA-eligible HDHP with a $60 monthly premium ($720 a year), a $3,000 deductible, 20% coinsurance after the deductible, and a $7,000 out-of-pocket maximum. The employer contributes $500 a year to the HSA of anyone who chooses Plan B.

Scenario one: a light year

Suppose your care for the year is a few office visits and a generic prescription, with a total negotiated cost of about $600, plus your free preventive checkup. Under Plan A, you pay copays, say about $150 in total, so your yearly cost is $1,800 in premiums plus $150, or $1,950. Under Plan B, you pay the full negotiated cost of $600 because you have not met the deductible, but preventive care is covered without cost sharing. Your yearly cost is $720 plus $600 minus the $500 employer contribution, or $820. Plan B wins by $1,130.

Scenario two: a moderate year

Now suppose you have about $5,000 of care: an MRI, a few specialist visits, and a round of physical therapy. Under Plan A, you pay the $750 deductible plus 20% of the remaining $4,250, which is $850, for $1,600 out of pocket. Your yearly cost is $1,800 plus $1,600, or $3,400. Under Plan B, you pay the $3,000 deductible plus 20% of the remaining $2,000, which is $400, for $3,400 out of pocket. Your yearly cost is $720 plus $3,400 minus $500, or $3,620. Before taxes, Plan A wins by $220.

Scenario three: a bad year

Suppose you need surgery and a hospital stay, and the negotiated cost is $40,000. Both plans hit their out-of-pocket maximums. Under Plan A, your yearly cost is $1,800 plus $3,500, or $5,300. Under Plan B, it is $720 plus $7,000 minus $500, or $7,220. Plan A wins by $1,920. This is the scenario to check against your savings: could you pay $7,220 in a single year without debt?

A shortcut: the head-start test

You can see the pattern behind these scenarios with one quick calculation. Add the annual premium difference to the employer HSA contribution. In the example, Plan B starts each year $1,080 cheaper in premiums plus $500 in employer money, a $1,580 head start. Plan B stays cheaper as long as the extra out-of-pocket costs it makes you pay, compared with Plan A, stay below $1,580. The most it can ever cost you beyond Plan A is the difference in out-of-pocket maximums, $3,500, minus that head start, or $1,920, which is exactly the bad-year result.

This test works for any pair of plans. A large head start and a small difference in out-of-pocket maximums make the cheaper-premium plan a strong default. A small head start and a large difference in out-of-pocket maximums mean the cheaper plan is a bet that you will stay healthy.

Add the HSA tax savings before you decide

Plan B's real advantage often comes from the HSA itself. Money you contribute through payroll to an HSA is generally exempt from federal income tax and from Social Security and Medicare payroll taxes, grows tax-free, and comes out tax-free for qualified medical expenses. Unlike an FSA, unused money stays in the account year after year and goes with you if you change jobs. Withdrawals for anything other than qualified medical expenses are taxable and, before age 65, generally face an additional 20% tax. After 65, non-medical withdrawals are taxed as ordinary income without that extra penalty, which is why some people treat an HSA as a supplemental retirement account.

Suppose you contribute $3,000 of your own money through payroll and you are in the 22% federal bracket. Adding the 7.65% payroll tax, you save about 29.65%, or roughly $890. Most states also exempt HSA contributions from income tax, although California and New Jersey do not. With that $890 included, Plan B's moderate-year cost drops to about $2,730, beating Plan A's $3,400. In the bad year, Plan B's cost drops to about $6,330, still more than Plan A's $5,300. In the light year, Plan B pulls even further ahead.

So the realistic answer in this example is that Plan B wins in most years if you fund the HSA, and Plan A wins only in the high-cost year. If you know a surgery, pregnancy, or ongoing treatment is coming next year, Plan A may be the safer bet. If you expect a typical year and have cash to cover the HDHP deductible, Plan B probably costs less, and the HSA balance becomes a long-term asset.

The 2027 HSA and HDHP numbers

The IRS released the 2027 HSA figures in Revenue Procedure 2026-24. For 2027, you can contribute up to $4,500 with self-only HDHP coverage or $9,000 with family coverage, up from $4,400 and $8,750 in 2026. People 55 and older can add a $1,000 catch-up contribution. Employer contributions count toward these limits, so in the example above, a Plan B enrollee could add up to $4,000 of their own money in 2027.

To qualify as an HDHP in 2027, a plan must have a deductible of at least $1,750 for self-only coverage or $3,500 for family coverage, and its out-of-pocket maximum cannot exceed $8,700 for self-only coverage or $17,400 for family coverage. Plan B in the example, with a $3,000 deductible and a $7,000 out-of-pocket maximum, meets both tests.

Separately, the Affordable Care Act caps in-network out-of-pocket costs for most non-grandfathered plans, including non-HDHP plans. That cap is $10,600 for self-only coverage and $21,200 for family coverage in 2026, and federal guidance sets it at $12,000 and $24,000 for 2027. Your employer's plans may well have lower limits, but the cap is a useful worst-case reference.

If you choose a PPO or HMO instead, a health FSA can offer some of the same tax savings. The 2026 health FSA contribution limit is $3,400. The 2027 FSA limit has not been announced yet; the IRS typically publishes it with other inflation adjustments later in the fall.

Recent law also widened what counts as HSA-compatible coverage. Under the One Big Beautiful Bill Act, HDHPs can permanently cover telehealth services before the deductible without disqualifying you from an HSA. Starting in 2026, bronze and catastrophic plans of the kind offered on the ACA marketplace are treated as HSA-compatible, and IRS guidance says they do not have to be bought through the marketplace to qualify, and certain direct primary care arrangements with monthly fees of up to $150 for an individual or $300 for a family no longer block HSA contributions. These changes matter most if you or a family member buys coverage outside of work.

Wrinkles that change the answer

Family coverage. With family HDHPs, check whether the deductible is embedded, meaning each person has an individual deductible within the family amount, or non-embedded, meaning the whole family deductible must be met before the plan pays for anyone. Federal rules also require an individual out-of-pocket limit within family coverage. Run your scenarios with your family's realistic usage, not a single person's.

Networks and drugs. A cheaper plan is no bargain if your doctors are out of network or a key prescription sits on an expensive tier. Check the provider directory and drug formulary before running numbers, and add the cost of any out-of-network care you expect.

Spousal coverage. If your spouse has access to a plan at work, compare covering each person on their own employer's plan with covering the family on one plan. Some employers add a surcharge for covering a spouse who has other coverage available.

Medicare. If you or your spouse is enrolled in Medicare, you cannot contribute to an HSA, even if you are still covered by an HDHP at work.

Cash flow. An HDHP shifts more cost to the moment you need care. If paying a $3,000 deductible early in the year would push you onto a credit card, the lower-deductible plan can be worth its higher premium, at least until you have built an HSA cushion.

What to do before your enrollment deadline

Pull the Summary of Benefits and Coverage for each plan, run the light, moderate, and bad-year scenarios with your own numbers, and include employer HSA money and your own tax savings. Choose the plan that is cheapest in your most likely year and still affordable in your worst one. If that is the HDHP, set your 2027 HSA payroll contribution during enrollment so the tax savings start in January.