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- I'm a full-time freelancer, so I purchase a health insurance policy on the marketplace every year.
- To find the best plan for myself, I run the numbers — including copays, premiums, out-of-pocket maximums, and prescription costs.
- After finding total annual costs, I take other things under consideration, such as in-network access to my doctors.
- Read more personal finance coverage.
As a self-employed individual, every year during open enrollment I head to Healthcare.gov to select a health insurance policy. (Open enrollment runs from November 1st to December 15th this year.)
I pull out a spreadsheet to make my decisions, but for those who are spreadsheet-averse, it is a doable task even without Google Sheets. Here's how to get started.
Ballpark your projected healthcare expenses
Before I even start looking at plans, I'll get as close as I can to an accurate estimate of my upcoming healthcare needs.
Sometimes I will average out the number of times I interacted with the healthcare system over the past few years. Other times, when I am able to project at least some of my future healthcare expenses, I will use my knowledge of my anticipated short-term medical needs.
I slot those needs into four categories:
- Number of annual primary care provider (PCP) visits for which you are charged a copay or coinsurance
- Number of specialist visits per year for which you are charged a copay or coinsurance
- Number of ER visits
- Number and type of prescriptions filled
These numbers will all be educated guesses. No one can see the future, and you have no idea how much insurance you will or won't need until after you need it.
Gather plan data, including deductibles, out-of-pocket maximums, and copays
I have a fair number of specialist visits and prescriptions filled annually. This takes high-deductible healthcare plans (HDHPs) off the table. I generally end up looking at silver or even gold plans because the coverage — even with its higher premiums — will save me money over the course of a year.
The first thing I look at is the deductible. This is the amount I will have to pay before coinsurance starts to kick in.
For example, my plan might cover 80% of my expenses after I meet my $3,000 deductible. I'd be responsible for the other 20% until I reach my out-of-pocket max, which is another number you should note and write down.
Next, I find copay information. Depending on the plan, I may be offered a flat copay for visits to my PCP, specialist, or the ER, or I may be offered coinsurance requiring me to cover a certain percentage of my bill every time I go in for care.
Finally, I check prescription coverage. If you have a medication you take regularly, you may want to search for specific coverage for the drug you take.
Plug in the numbers
Now you have the numbers you need to make a good estimation. You have an idea of how much you'll need to access healthcare, and plugging these numbers into each individual plan can give you a better idea of anticipated costs beyond premiums.
Estimate copays
For each plan, multiply the copay/coinsurance by the number of PCP visits you have per year. Do the same for anticipated specialist and ER visits.
For example, if you anticipate making a total of five visits to your PCP with a $10 copay per visit, five visits to specialists with a $40 copay, and want to allow for two emergency room visits with a $500/visit copay, you'd multiply the copay by the number of anticipated visits for each category.
Your expected PCP visits would theoretically cost $50 in copays, the specialists would be $200, and the ER would be $1,000, so your anticipated annual copay in this example is $1,250.
Estimate out-of-pocket charges
Next, estimate the average or projected out-of-pocket charges. To do that, look over all the expenses insurance didn't cover last year. Maybe they partially covered it through coinsurance, but you still had to pay part of the bill.
Are any of these expenses regular? If so, add them to your predicted tab for the upcoming year. You may want to throw an unexpected lab in there for good measure, especially if you're headed to the ER.
For example, last year your insurance charged you 20% on top of your copay for visits to your doctor that were not covered under preventive care. You don't want to take the 20% you paid; you want to consider 100% of the expense in your calculations. If you don't have a lab from the past year, you can look another year back or even call your local diagnostic lab to get a quote for current services with your insurer.
Let's say you add all these services together, and figure the total cost is $2,700. The healthcare plan you're considering offers coinsurance where you'd be paying 10%, bringing your total costs for services outside your deductible to $270.
Does this exceed out-of-pocket maximums?
Next, add together the $270 coinsurance and $1,250 deductible total, plugging in your own numbers, of course. In this example, the sum will be $1,520.
Then, look at the max out-of-pocket costs for the plan; let's say it's $1,200 in this example. That means you will only have to shoulder $1,200 of the costs and insurance will cover the remaining $320 — and any additional costs incurred thereafter.
Estimate prescription costs
Depending on how your prescription plan works, you will run a similar process for prescription costs throughout the year. However, this process isn't quite as straightforward because of the complex way in which prescription prices are set for consumers.
If you need a drug regularly, your best bet is to read the plan to find out if it is covered, and if so, which pricing tier it is on.
If you are running rough calculations, you may want to look at a couple of commonly prescribed prescriptions, such as antibiotics or pain medications, in case you do catch a bout of illness or incur injury throughout the year.
If you cannot find this in the text of your plan, which should be provided by the marketplace, you can try calling the insurer. Keep in mind, though, that many customer service reps are disallowed from making guarantees about coverage benefits, so calling and reading might be equally as frustrating.
For our example, let's assume $54/year in prescription costs, though yours could obviously be much higher depending on your medical needs and insurance coverage.
Total annual projected healthcare plan costs
Add the copays, additional out-of-pocket costs, and prescription costs together. Then, multiply the monthly premiums, including subsidies, by 12. This is the amount you'll pay for your premium throughout the year — add it to the cost of your copays, out-of-pocket costs, and prescription costs.
In this example, your total out-of-pocket costs are $1,200 plus $54 in anticipated prescription costs. The offered monthly premiums are $462 after subsidies. You multiply that by 12, giving you a total of $5,544. This plus the $1,200 and $54 brings the grand projected total costs under this plan to $6,798.
This should not be considered a hard number; your costs may come in over or under depending on your actual healthcare needs throughout the year. Insurance is always a calculated gamble. But having this number for your anticipated needs can give you a better idea of how each plan could potentially play out for you throughout the year.
Choose a plan
Theoretically, whichever plan has the lowest total number should be the best overall choice based on annual costs alone. However, there can be extenuating factors.
For example, if you have many healthcare needs but you won't hit your out-of-pocket max until June, you might have almost zero medical bills for the second half of the year as insurance coverage should kick in full-force. But you have to be able to float the medical costs the first six months of the year. And if you can't, the overall cheapest plan might not be the most viable for you.
For the past several years, I have been purchasing more expensive plans because my doctors were only in-network for one of the two insurance networks in my region. I'm not willing to switch healthcare providers every year as I chase the lowest premiums.
Figuring out the best healthcare plan for you may be as easy as determining the cheapest option after you plug in the numbers. Even if it's not, running the math is an important step. It forces you to literally put a dollar value on your choices as you make some hard ones.
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