The $5,960 Mistake Most Families Make During Open Enrollment
Open enrollment packets are designed to look helpful. They give you a table with premiums, deductibles, copays, and out-of-pocket maximums. You scan the columns, pick the plan with the lowest numbers, and move on with your life.
That is how most people choose a health plan. And that is how most people end up overpaying by thousands of dollars a year.
The problem is not the information in the packet. The problem is what the packet leaves out. If one of your plan options is an HDHP that qualifies for a Health Savings Account, there is a massive tax benefit that never shows up on any comparison sheet. For a family in the 22% federal bracket maxing out an HSA, that benefit is worth roughly $3,100 per year. Factor it in and the "expensive" high-deductible plan often turns out to be the cheapest option, even for families with significant medical costs.
Here is a 5-step framework for comparing health plans that takes about 5 minutes and includes everything the HR packet misses.
Step 1: Add Up Annual Premiums
Start with the monthly premium for each plan option and multiply by 12. This is the baseline cost you pay regardless of how much healthcare you use.
Premium differences between plan tiers are often larger than people realize. A $200/month gap between an HDHP and a mid-tier PPO adds up to $2,400 per year. That is real money you are spending before a single doctor visit.
Write down the annual premium for each plan. That is your first number.
Step 2: Estimate Your Annual Medical Spending
Look at last year's medical expenses. Include everything: office visits, prescriptions, lab work, imaging, dental, mental health, urgent care, ER visits. If you have dependents, add their costs too.
Be honest but do not catastrophize. Most families have a reasonably predictable baseline of medical spending. Some years are higher (new baby, surgery, injury), some are lower. Use a typical year, not your worst year.
If you are not sure, here are rough benchmarks:
- ●Minimal use (mostly preventive care): $500 to $1,500
- ●Low use (a few visits, occasional prescriptions): $1,500 to $3,000
- ●Moderate use (regular visits, ongoing prescriptions): $3,000 to $6,000
- ●Heavy use (chronic conditions, multiple specialists, frequent care): $6,000 to $12,000+
Write down your estimated annual medical spending. That is your second number.
Step 3: Calculate Out-of-Pocket Costs Under Each Plan
This is where most comparisons get sloppy. Each plan has a different structure for how you pay for care: deductibles, copays, coinsurance percentages, and out-of-pocket maximums.
For each plan, calculate what you would actually pay given your expected medical spending:
- ●Apply the deductible. You pay 100% of costs until you hit the deductible.
- ●Apply coinsurance. After the deductible, you pay your coinsurance percentage (typically 10% to 30%) until you hit the out-of-pocket max.
- ●Cap at the out-of-pocket maximum. Your total medical costs for the year cannot exceed this amount.
For plans with copays, estimate the copay cost based on your expected number of visits and prescriptions.
The result: your estimated out-of-pocket spending under each plan.
Step 4: Add the HSA Tax Savings (The Line Everyone Forgets)
This is the step that changes everything.
If one of your plan options is HSA-eligible (any qualifying HDHP), calculate the tax savings from contributing to the HSA. The formula:
HSA contribution x (federal tax rate + state tax rate + 7.65% FICA) = annual tax savings
For 2026, the HSA contribution limits are $4,400 (individual) and $8,750 (family). Here is what the tax savings look like at common brackets:
| Tax bracket | Individual HSA tax savings | Family HSA tax savings |
|---|---|---|
| 12% federal | $866 | $1,722 |
| 22% federal | $1,306 | $2,596 |
| 24% federal | $1,394 | $2,771 |
| 32% federal | $1,746 | $3,470 |
These numbers include the 7.65% FICA savings from payroll contributions. They do not include state income tax savings, which add another $200 to $800+ depending on your state.
Subtract the HSA tax savings from the HDHP's total cost. This is the number that flips most comparisons.
Step 5: Compare the Bottom Line
Now put it all together:
Net annual cost = Annual premiums + Estimated out-of-pocket spending - HSA tax savings
Run this calculation for each plan. The lowest net annual cost wins.
Here is a real example. A family in the 22% federal bracket comparing two plans:
| HDHP | Mid-tier PPO | |
|---|---|---|
| Annual premiums | $7,200 | $11,400 |
| Estimated out-of-pocket | $5,500 | $3,800 |
| HSA tax savings | -$2,596 | $0 |
| Net annual cost | $10,104 | $15,200 |
The HDHP saves this family $5,096 per year. Over five years, that is $25,480. And that is before accounting for the investment growth on the HSA balance, which compounds tax-free.
Do Not Forget the Worst Case
Your typical year is the most likely scenario. But also run the worst case: what if you hit the out-of-pocket maximum on each plan?
Take each plan's out-of-pocket max, add the annual premium, and subtract any HSA tax savings. Compare those worst-case numbers too.
In many cases, the HDHP still wins even in the worst-case scenario because the premium savings and HSA tax benefits are large enough to offset the higher out-of-pocket max. But if the gap is close in the worst case and wide in the typical case, the HDHP is still the better bet for most years.
The Breakeven Point
You can also find the exact medical spending level where both plans cost the same. Below that spending level, the HDHP wins. Above it, the PPO might win (or might still lose once you factor in HSA tax savings).
For many family plan comparisons, the breakeven point is surprisingly high, often $10,000 or more in annual medical spending once HSA tax savings are included. That means the HDHP wins for all but the most extreme medical expense years.
Skip the Spreadsheet
I built a free health plan comparison calculator that does all of this math automatically. Enter your plan details, expected medical spending, and tax bracket. It calculates the net cost, worst-case scenario, and breakeven point for up to three plans side by side.
Most online calculators skip the HSA tax savings entirely. This one includes them because they are often the single biggest factor in the comparison.
The Compound Effect
Choosing the right plan is not just about saving money this year. If the HDHP saves you $3,000 to $5,000 per year and that money stays invested in your HSA growing tax-free, the long-term impact is substantial.
$5,000 per year invested at 7% for 20 years grows to about $219,000. That is wealth you build simply by choosing the right health plan and letting the HSA do its job.
The 5-minute comparison pays dividends for decades. Take the time to run the real numbers.