What your benefits actually cost you, and the three numbers to compare

Most people choose a health plan on the one number that cannot surprise them. The premium comes out of every paycheck whether anything happens or not, so it feels like the cost of the plan. It is the cost in a year when nothing goes wrong.

The two numbers that decide what a bad year does are the ones you hope never to meet: the deductible and the out-of-pocket maximum. A plan with a small deduction and a large gap behind it is a different product from one with a big deduction and a short gap, and the enrollment screen shows them side by side as if they were the same shape.

What follows describes how the pieces fit. It does not recommend a plan, a tier or a contribution level; that depends on facts only you and a qualified adviser have.

The three numbers and what each one does

The premium is what you pay to be covered, taken per pay period. The enrollment screen and your paystub often show different figures for the same thing.

The deductible is what you pay for covered care before the plan starts sharing costs. It resets on the plan year, which is not always January.

The out-of-pocket maximum is the ceiling on what you can pay in a plan year for covered, in-network care. Premiums do not count toward it. Once you reach it, the plan covers the rest of the year.

Between them sit coinsurance, your share of each bill as a portion, and copays, flat amounts per visit. Whether copays count toward the deductible varies by plan.

Why the deduction on your stub is not the whole premium

The amount taken from your check is your share. Employers commonly cover a large part of the premium for the employee and a smaller part for dependents, which is why adding a spouse or a child can raise the deduction by more than it seems it should.

Tiers are priced on separate schedules rather than as multiples: employee only, employee plus spouse, employee plus children, family. A total compensation statement, if your employer issues one, shows the employer share.

Pre-tax deductions, and the line on your stub that moves

Most health premiums and some other contributions come out before income tax is calculated. On your stub, taxable wages sits below gross pay, and the gap is roughly those pre-tax items.

That is why a dollar of pre-tax premium reduces your take-home by less than a dollar. How much less depends on your own tax situation, which is a question for a qualified tax professional rather than a benefits screen.

Health savings accounts, flexible spending accounts and traditional retirement contributions each carry their own eligibility rules, deadlines and treatment of unspent money.

The match is deferred pay, not a perk

An employer retirement match is compensation with conditions. Two do the work: the formula, setting how much the employer puts in against what you put in, and the vesting schedule, setting when that money becomes yours if you leave.

Vesting is commonly either a cliff, where nothing is yours until a service date and then all of it is, or graded, where a portion vests each year. Your own contributions are yours from the start.

One detail catches people out: some plans calculate the match per pay period, so an uneven contribution pattern across the year can leave match unclaimed, while others true it up annually. The plan document is the only authority on which you have.

The comparison worksheet

Before open enrollment closes, write one column per plan and fill every line from the plan documents and the Summary of Benefits and Coverage, not the enrollment screen.

• Plan name, plan year start date, and the coverage tier you would actually elect.
• Premium per pay period, times the number of pay periods in your year, for an annual figure.
• Deductible, individual and family, and whether the family deductible is embedded or aggregate.
• Out-of-pocket maximum, individual and family.
• Coinsurance after the deductible, and copays for primary care, specialist, urgent care and emergency, noting which count toward the deductible.
• Prescriptions: whether they run through the deductible, which tier yours fall in, and whether your pharmacy is in network.
• Your current doctors and any facility you use, checked against the network directory by name.
• Whether the plan pairs with a health savings or flexible spending account, and whether the employer contributes.
• The waiting period, the coverage effective date, and the date coverage ends if you leave.
• Retirement: match formula, vesting schedule, per period or trued up.

Then put the worst-year number at the bottom of each column.

A plan is two numbers wide: what it costs when nothing happens, and what it costs when everything does. Any comparison that only uses the first one is not a comparison.

Who to ask, and what not to ask them

Your benefits administrator answers what your plan says, what the deadlines are and what documents exist. Ask in writing and keep the reply.

Which plan or contribution level fits your circumstances is for a qualified adviser, and the tax side for a tax professional. If a claim is denied, appeal rights and the agency overseeing them depend on how your plan is structured and on your state, so ask your administrator which applies before the window closes.