Deductible vs Premium Tradeoff Calculator

Your own share of the premium on the low-deductible plan for a whole year. The gap between this and the other premium is what the lower deductible costs you up front, and it is usually far smaller than people expect: on the average pair it is about a hundred dollars a year.

The most the low-deductible plan can leave you paying for covered care in a year. The survey this workbook takes its other defaults from publishes no average for this figure, so the value it opens with is a convention of this workbook rather than a measured one. Replace it from the plan summary.

What you pay for care on the low-deductible plan before it starts sharing the cost. The gap between the two deductibles is what you are buying with the extra premium, and the whole comparison turns on whether that gap is larger than the premium gap plus whatever the account is worth.

The federal income tax rate on your next dollar of income, which is the rate a contribution into the account is saved at. It is not your average rate, which is lower. If you do not know it, the marginal versus effective tax rate calculator in this cluster works it out from your income and filing status.

Whether the contribution is taken from your pay under a cafeteria plan. Money contributed that way escapes Social Security and Medicare tax as well as income tax, which is worth about seven and a half percent more. A contribution you make directly to the account is deducted on your return and does not escape payroll tax, and that is what No means here.

Optional. Your state income tax rate, if your state taxes income and recognises the account. Leave it blank for a state with no income tax, and for the two states that tax these contributions anyway. It is a flat stand-in for a schedule of brackets, so it is an approximation even where it applies.

Optional. What you put into the account yourself over the year. Leave it blank to compare the two plans on premiums and care alone. Only the tax saved on it counts here, never the contribution itself, because the money is still yours: it is saved rather than spent. The annual limit covers your employer contribution as well as yours, so the most you may add is the limit less whatever your employer puts in, and the status line warns when the two together go past it. Nothing is trimmed: an excess is priced as entered and the warning explains that it would not be deductible.

Optional. What your employer pays into the health savings account each year on the high-deductible side. Leave it blank if there is none, which is the case for about one in seven people offered one of these plans. It is subtracted from the high-deductible plan cost in full, because it is money you have only because you chose that plan. It also counts against the same annual contribution limit you do, so it reduces the most you may add yourself, and the status line warns when the two together go past the limit.

Whether the plan covers you alone or a family. It selects the statutory minimum deductible, the statutory out-of-pocket ceiling and the annual account contribution limit, all three from the same row of the table, and it changes nothing else in the arithmetic.

Your share of the bill after the deductible is met and before the out-of-pocket maximum is reached, as a percentage. Twenty percent is the usual figure for a hospital admission. It is applied to both plans here, because the two are typically written on the same schedule; where they differ, the plan you care most about is the one to enter.

What you expect providers to BILL the plan for your care over the year, before any discount for your share. It is not what you expect to pay yourself, and entering that instead is the commonest mistake made with a calculator of this kind. Nobody knows this figure in advance: about a twentieth of people account for half of all health spending and about a seventh spend nothing at all, so read the grid and the cost curve rather than trusting one number.

Your own share of the premium on the high-deductible plan for a whole year, not the total premium and not the amount per pay period. Your employer usually pays most of the total, and using the total instead of your share reverses the answer for most people. Multiply the amount taken from your pay by the number of pay periods in the year.

The most the high-deductible plan can leave you paying for covered care in a year. Once your share reaches it the plan pays everything else, and the premium is on top. The average plan of this kind sets it at little more than half the statutory ceiling, so read it off the plan summary rather than assuming the legal maximum.

What you pay for care on the high-deductible plan before the plan starts sharing the cost. It is also the axis across the top of the grid at the foot, so the grid shows what a different deductible would be worth to you. For the plan to come with a health savings account this has to be at or above the statutory minimum for your coverage.

How much more of the premium the low-deductible plan asks you to pay over the year. This is the first of the three things the high-deductible plan has going for it, and on the average pair of plans it is the smallest of them.

The values across the top of the grid: the deductible on the high-deductible plan, in steps of two hundred and fifty either side of yours and never below nothing. Read a column to hold the deductible fixed and vary the care. The middle entry is your own figure.

Reads OK, or explains why the figures entered do not describe a comparison this model can make, or why the answer deserves a second look.

What a year on the low-deductible plan costs you in total: your share of the premium plus everything the plan leaves you paying for the care you entered. No account money is credited on this side, because a low-deductible plan does not come with one.

The most a single year on the low-deductible plan can cost you: your share of the premium plus the out-of-pocket maximum. It is what you are exposed to if the year goes badly, and it is the figure to compare against savings you could reach in a hurry.

Machinery, and NOT an input. Excel substitutes each value from the row axis into this cell while it fills the grid; the rest of the time it mirrors the billed spend. Change the billed spend above, never this: the axis is derived from it, so editing the mirror moves the axis while the table walks and the grid comes out meaningless.

The body of the grid: the low-deductible plan cost for the year less the high-deductible plan cost, recomputed for every combination of the two axes. One hundred and twenty-one cells, each one the whole calculation run again. It is a component of the table rather than a result on its own.

The values down the left of the grid: the billed medical spend for the year, in steps of five hundred either side of yours and never below nothing. Read a row to hold the amount of care fixed and vary the deductible. The middle entry is your own figure.

Machinery, and NOT an input. The same for the column axis: Excel substitutes into it while filling the grid, and the rest of the time it mirrors the deductible on the high-deductible plan.

Machinery. Excel requires the formula being tabulated to sit in the top-left corner of the grid, where it means nothing to a reader, so it is formatted away. It holds the difference between the two plan costs.

The low-deductible plan cost for the year less the high-deductible plan cost. A positive figure means the high-deductible plan is cheaper by that much at the care you entered, and a negative one means the low-deductible plan is. It is also what the grid at the foot tabulates, so the grid shows how that answer moves with the care you need and with the deductible.

What the high-deductible plan leaves you paying for care over the year, with the premium excluded and before the account money is credited. Comparing it with the same figure for the other plan shows what the higher deductible actually costs in a year like the one you entered, rather than what the deductible gap suggests.

Which plan costs less at the care you entered, in words. Two costs within half a cent of each other are reported as the same, because money is billed in cents. It answers only for the spend you entered; the break-even below is what tells you how far that answer holds.

What the break-even figure means for this pair of plans: either that the two meet at the spend shown, or that one of them is cheaper at every spend and no crossing exists. The second case is common with a real employer contribution.

The billed spend at which the two plans cost exactly the same. Below it one plan wins and above it the other does. It reads zero when there is no such spend, which happens more often than the usual rule of thumb suggests, and the note beside it says which plan wins in that case. It is found exactly rather than searched for, because both plan costs are straight lines between the few points where they bend.

The tax you do not pay because your contribution went into the account: the contribution multiplied by your marginal federal rate plus your state rate plus, where it is routed through payroll, the payroll rate. It is a saving on money you were going to save anyway, so treat it as a discount on the high-deductible plan rather than as income.

What the low-deductible plan leaves you paying for care over the year, with the premium excluded: the deductible up to what is billed, plus your coinsurance share of the rest, capped at the out-of-pocket maximum.

Whether the high-deductible plan as entered sits inside the statutory limits for its coverage, which is what a plan has to do before a health savings account can be opened alongside it. When it reads No the employer money and the tax saving would not be available, the status line says so, and the comparison above still shows them so you can see what is being given up.

What a year on the high-deductible plan costs you in total: your share of the premium, plus what you pay for care, less the employer contribution into the account and less the tax saved on your own contribution. All three of those subtractions are advantages of choosing this plan, and leaving any of them out is what makes most comparisons favour the low-deductible plan.

The most a single year on the high-deductible plan can cost you: your share of the premium plus the out-of-pocket maximum, less the employer contribution and the tax saving. The gap between the two worst years is usually far smaller than the gap between the two deductibles, which is the point most often missed in this decision.