Essentially, what I'm looking for is a simulation of out-of-pocket cost as a function of a health insurance plan and an arbitrary sequence of medical events -- in other words, a computational model of how an insurance company processes claims. Does this exist?

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    For what purpose are you interested in this? Anyway, I do know that many companies periodically provide employees with self-service calculators to assist in choosing a health insurance plan for the upcoming plan year. I've developed a few. Jan 25, 2017 at 3:39
  • I was helping a friend evaluate plans vs. various scenarios, went to build a Sheets formula for it, and realized it's a non-trivial exercise.
    – rcrogers
    Jan 25, 2017 at 4:02
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    Some of the calculations done in this related question should help: money.stackexchange.com/questions/72431/…
    – TTT
    Jan 25, 2017 at 4:53

1 Answer 1


Out of pocket medical costs is relatively easy to calculate. You should be able to use the following formula.

Annual Premiums + Policy Deductible + Policy Co-Insurance = Maximum Exposure

As far as how an insurance company processes claims.

(Full billing amount - % of network contracted rate) - remaining deductible/coinsurance = Insurance Company Responsibility.

So an example:

Mary goes to the doctor and has a procedure that the full cost is $500. She went to a network doctor and the insurance company has a 10% discounted rate with that particular provider. That brings the total bill to $450. Mary still owes $200 on her deductible and has a co-insurance of an additional $1000 at an 80/20 ratio.

  • $450 - $200 = $250 After deductible is paid.
  • 80% of $200 is $160. This is the insurance companies portion.
  • Mary had to pay $200 due to her deductible and $40 due to her co-insurance.
  • Mary's responsibility is $240.
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    "Annual Premiums + Policy Deductible + Policy Co-Insurance = Maximum Exposure" that works as long as the member is only considering covered services and understands if there are restrictions on where and how they get those services (i.e. in network vs out of network benefits, requirements for preauths, etc). Unfortunately, many of the "surprises" consumers get happen around those fringe areas.
    – dwizum
    Jun 13, 2019 at 20:20
  • That is fair, but there is no way to calculate the other expenses in any sort of manageable way. Jun 13, 2019 at 20:21
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    Agreed. I made the point as a footnote, not really as a correction, since what you posted is correct on it's own. I heard alarm bells though when the OP seemed to be asking to simulate "an arbitrary sequence of medical events" since, in the real world, that sequence may include things not covered by the plan.
    – dwizum
    Jun 13, 2019 at 20:24
  • Yeah I am curious as to more background information on what the practicality of this exercise is. Jun 13, 2019 at 20:26
  • In US (at least parts of US I've lived) it's premiums + min( deductible + coinsurance * applicableclaims, yearlymaxOOP ) i.e. someone pays premiums always (for many people employer pays all or part) plus you pay 100% up to the deductible then coinsurance until that plus deductible reaches maxOOP (and after that you pay 0%). For covered/authorized services and providers, as you note. Jun 14, 2019 at 12:25

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