PPO: $216 (out of pocket) HDHP: -$483 + $483 (HSA Contribution) = $0 (out of pocket) Total Out of Pocket & Final Results. Your email address will not be published. An HSA (Health Savings Account) is a savings account you can use with a high-deductible health plan (HDHP). Participants in HDHPs must select a provider from the network but can pick whichever provider they choose in said network. Required fields are marked *. Employee + Spouse: $1,400. As previously said, you will have to pay higher out-of-pockets costs. Not once in the above examples does the PPO come out ahead. Clarity. Learn More What We Do Wealth Management Proactive financial, retirement, and tax planning integrated with low-cost, tax-smart portfolio management. It’s not a form of health insurance. During open enrollment, you may see tables or charts that show your available plans’ premiums, deductibles and/or out-of-pocket responsibility. When comparing these two plans specifically, the combination of the $2,555 in reduced annual premiums and the $1,125 employer HSA contribution (combined total of $3,680) are simply too much for the PPO plan to overcome. Subscribing to Amazon affiliates like Amazon Family can help you save money on baby stuff like diapers when buying them in bulk. One ER visit with transport: $1800.00 under the HDHP/HSA plan. With an HDHP, the premiums are typically lower and more of the expenses are variable. Even though the HSA plan has both a higher deductible and a higher coinsurance percentage, the huge gap in premiums and the lack of an employer HSA contribution under the PPO plan put it at a big disadvantage. Plus, picking which plan is right for you depends almost entirely on you and your family’s situation. Look at the differences between the deductibles, coinsurance amounts, copays, prescriptions and out-of-pocket maximums and think about how the different coverage levels may affect how you pay for your healthcare. HSA vs. PPO: The Verdict. This is a huge benefit and the tax savings alone would save a typical family at least $1,000. HMO, POS, PPO, and HDHP: Making Sense of Different Types of Health Plans June 07, 2018 If you're shopping for a new health plan, you may hear a lot about HMO, POS, PPO, and HDHP plans — but you may not understand the differences between them. And if you need extra help choosing which plan is right for you, contact The Olson Group today! No, if you want to see a specialist or go to a hospital, you make the appointment yourself. Yes, HDHPs allow you to see any medical provider, including those who are out-of-network. If you … Or, they can provide these services below the minimum annual deductible. With 0 medical expenses, the HDHP/HSA is $1804.18 cheaper. The difference between PPOs, HMOs, POSs, and EPOs lies in the flexibility of their networks, whereas an HDHP is determined by the amount of the deductible. Denver, CO 80202. Preventive care includes, but isn’t limited to: periodic health evaluations, routine prenatal care, immunizations, tobacco cessation, obesity weight-loss programs, and screening services. For 2020, the IRS defines an HDHP as any plan with a deductible of at least $1,400 for individuals and $2,800 for a family. HSA (Health Savings Account) is a tax-advantaged health benefit plan exclusively available to taxpayers in the United States who are enrolled in a High-Deductible Health Plan (HDHP). Below is a comparison of SmartHealth’s HDHP 2000/10 and PPO 750/15 plans. Similarly, under a PPO, participants don’t need a referral to receive care from a specialist or a hospital. Note, these out-of-pocket limits don’t apply to out-of-network services. A PPO switches it up, offering a lower deductible and a higher monthly premium. Well, as with most choices in life, it depends. 1. I've been using the HDHP+HSA option for the last 3 years, and have been able to save ~7k in my HSA account, all of which was the difference in premium from the PPO and HDHP plans (PPO premium was 125, HDHP premium was 50, so my contribution to my HSA was 75). For 2020 the maximum contributions for HSAs are $3,550 for individuals and $7,100 for families, respectively. Though, you may receive more coverage for an in-network provider. Yes, if you receive out-of-network care, you’ll have to submit your claims to be reimbursed. That’s a critical first step when weighing your choice of an HDHP versus a PPO (Preferred Provider Organization) or another type of traditional health plan. 3. An HDHP plan is typically about 10% cheaper than a traditional preferred provider organization (PPO) plan and is usually associated with a company funded tax-advantaged health savings account (HSA) that is meant to fund some of your medical expenses. These are paid by you and your employer regardless of whether you use the benefits or not. You do not get to keep that money or roll any over to another year. That means a participant in an HDHP will have to spend more, than someone in a PPO, to reach the point where the insurance company will help pay for medical costs. Read a comparison of HMO vs PPO health plans here. 600 17th Street Suite 2800 South, Independent. After factoring in the cost of the plan and HSA contributions, modeled (PPO) and actual (HDHP) total out of pocket costs for the year were: PPO: $1,974; HDHP: $936; So, I ended up saving $1,038 out of pocket. Greg Ward, Think Tank Director @GregWard 03/14/16 . It also empowers the patient to seek lower costs since they have to foot a larger percentage of the bill when they need care. So, if you don’t use the money you contributed during the course of a year, you can keep rolling it over into the next. A Preferred Provider Organization is a type of health insurance plan that offers a network of healthcare providers. What is HSA? Contributions are tax-deductible. Higher costs on premiums, lower costs on deductibles and out-of-pocket expenses. The premiums, deductibles, out-pocket-maximums, and your employer’s HSA contribution can totally change the decision from one plan to the next. The plans detailed below are actually what is available through my wife’s employer. Additionally, HDHPs, like other health plans do carry a maximum out-of-pocket limit a participant can’t go over. Click Here to Skip Ahead. This video provides a simple explanation of how an HDHP and a PPO are the same and different. That means the total annual benefit of this HSA plan vs its PPO counterpart could be up to $4,700. Period. Insight. Jonathan founded Wealth Engineers to provide an alternative to the high costs and conflicts of interest of a typical financial advisor. Summary. But, if you have a chronic condition or large family, the out-of-pocket costs under an HDHP may be too high for you. For example, beginning in 2015 we plan to max our HSA by contributing $5,525 in addition to the $1,125 from my wife’s employer. 4.  The short answer: if you have the cash flow to afford the possibly larger deductibe, a HDHP very […]. PPO: $1,822.20 out of pocket; HDHP: $936 + $655.63 – ($655.63 HSA contribution outlays) = $936 out of pocket; I saved $886.20 out of pocket with the HDHP vs. the PPO. In addition, we’d save 7.65% in FICA taxes on the $5,525 we contribute to the HSA (which amounts to about $423). Jonathan Duong, CFA, CFP® is the Founder and President of Wealth Engineers, a fee-only independent Registered Investment Adviser (RIA). You can invest your HSA contributions, and the interest accrues tax-free. For example: Same: Both plans pay 100% of the cost of preventive care and protect wallets with an annual out-of-pocket maximum. Similarly, you can also pass on an HSA to a beneficiary. The catch-up contribution limit for those over age 55 is $1,000. Rent or subscribe. No, if you want to see a specialist or go to a hospital, you make the appointment yourself. The key to maximizing the effectiveness of your HDHP is utilizing a health savings account (HSA). Some plans are $3,000 to $5,000 less than the average. 303.500.3245 On average, this reduces costs and does what insurance is generally best designed to do: Cover you in the event of catastrophic events, while you take care of day-to-day expenses. Jonathan specializes in working with busy professionals, entrepreneurs, and retirees to help them navigate through the unique financial challenges they each face and build a more confident path to achieving their goals. Yes, PPOs allow you to see any medical provider, including those who are out-of-network. Thus, what I’ve outlined is how we specifically thought through our decision. If you go to the doctors a lot, you have a chronic condition, and you need prescriptions, then a PPO … You can also roll your HSA contributions over to a different HSA if you get a new job. Why does this happen? I’ve also assumed that annual expenses in each scenario would be 100% incurred by one spouse. Had I picked the PPO plan, I'd be out that 7k with nothing to show for it. One of the most critical decisions employees make during open enrollment is which type of health insurance plan you select. Find a list of these expenses from the IRS here. If you have access to both an HDHP and PPO, be sure to run the numbers yourself or have a financial planner help you. Giving participants their choice of provider (within the network) encourages you to compare prices for health, dental, vision, and prescriptions. If you, or your dependents, utilize a lot of specialists or require regular hospitalization, a PPO may be better for you. If you know you’ll need more health care in the coming year and you can afford higher premiums, a PPO is a good choice. Having a high deductible provides an advantage to the health care consumer by reducing their monthly premium for ongoing coverage. When you’re choosing between an HDHP vs PPO, there is a multitude of factors you must consider. For 2015, they’ve tipped the scales far enough that I think it now makes a lot of sense for us to go with the HDHP. Scenario 2: $5,000 in medical expenses during the year. HSAs allow individuals/employers to set aside money on a pre-tax or tax-deductible basis and then withdraw the money tax-free to pay qualifying medical expenses. HSAs are a form of medical savings account that must be accompanied by a high-deductible health insurance plan. It provides a lower cost for employers and employees. That means a participant in an HDHP will have to spend more, than someone in a PPO, to reach the point where the insurance company will help pay for medical costs. HDHP is good for you if you don’t need much medical attention, it has low premiums and you can get an HSA with it, where you can save for some medical procedures. You can withdraw money tax-free. Read a comparison of HMO vs PPO health plans here. So, participants will pay for more of their healthcare costs before the insurance company starts to pay its share (your deductible). But which plan is right for you and your family? (Counts against deductible) $100.00 co-payment under the Traditional plan. Your choice depends on your overall health and your pocketbook. Since it’s open enrollment time for many of my clients, I’ve recently been reviewing quite a few different health plan options for the coming year. Once again, the HDHP delivers net savings to compared to the PPO. Wealthfront thinks your HSA is dumb. (Does not count against deductible) At this point, the HDHP/HSA plan is $104.18 cheaper. HDHP with HSA. Don’t be afraid of an HDHP simply because it has “high deductible” in the name. ;0) Great way to break down the numbers. Engineers. **Capped at out-of-pocket max of $10,000. November 2, 2018 October 3, 2018 by Louise Gaille. All Rights Reserved. An HDHP will usually mean a lower premium for employers who offer health insurance as a benefit. Finally, keep in mind that how you use the healthcare you have access to can greatly impact which plan is right for you. The biggest advantage PPO plans offer over HDHPs is lower deductibles. Unfortunately, health insurance can be confusing. | Bason Asset Management, How to Respond During the Next Market Decline. PPOs are the most common type of health plan in the employer-sponsored health insurance market, while HMOs lead the way in the individual insurance market. The flipside for those in an HDHP is these plans typically have significantly lower monthly premiums. Don’t assume that a high-deductible plan automatically means that you’ll pay more out of pocket. Learn more about the benefits of HSAs here. You can make withdrawals from your HAS tax-free, as long as the money is used for qualified medical expenses. Still, you will have to pay more out-of-pocket medical costs if you want to see an out-of-network provider. Fee-Only. Even if your nonmember doctor accepts the PPO rate, your plan may make you pay an extra amount because the doctor isn’t a member of the plan. An HSA is an individual bank account that helps participants save and pay for covered healthcare and qualified medical expenses. HDHP Vs. PPO. A High-Deductible Health Plan is a type of health insurance plan that, as its name implies, has a higher deductible than traditional insurance plans such as an HMO, EPO, or PPO. A PPO (Preferred Provider Organization), refers to the network coverage your health plan gives you access to. 2. But you will pay more for out-of-network care. 2. […] won’t bother going into a big analysis of a HDHP vs. a regular PPO plan, because my friend Jonathan at Wealth Engineers has already done that. Permalink Report. © 2013-2021 Wealth Engineers, LLC. Based on your current medical needs, deciding between an HDHP vs. PPO plan comes down to three scenarios: Both plans cost you the same in the end; You save more money with a PPO plan. A high-deductible health plan (HDHP) is a form of health insurance that offers a higher deductible than other forms of traditional health insurance. Wealth Engineers is a fee-only Registered Investment Advisor regulated by the Colorado Division of Securities and the California Department of Financial Protection and Innovation. Side by Side Comparison – HSA vs PPO Health Insurance in Tabular Form 5. Assuming that we don’t incur any medical expenses during the year, other than for preventative care, the HDHP clearly comes out ahead. But this plan allows you to see specialists and out-of-network doctors without a referral. HDHP’s will have lower premiums than PPO’s. HDHP vs PPO To enroll in an HSA, you must be enrolled in an HSA-eligible, high-deductible health plan. HSAs provide three distinct tax benefits that help participants save: 1. For each of the last two years I have done a similar analysis as what I’m sharing here and in both cases we elected to go with the PPO. Important Disclosures & Terms of Use | Privacy Policy. Looking For A Comparison Chart? Health Savings Accounts (HSAs) were created by the Medicare bill signed by President Bush on December 8, 2003. It’s also important to note that HDHPs can provide preventative care benefits without them counting toward your deductible. Thus, I thought it would be helpful to share an example of how to compare two of the more common health insurance options offered through a major employer: A high-deductible health plan (HDHP) with an HSA vs a preferred provider organization (PPO) plan. The President and Your Portfolio: Does it Matter Who is in the White House? PPO (Preferred Provider Organization) With a PPO, the amount that comes out of your paycheck each month (known as the "premium") will be higher than if you choose an HDHP, but you likely won't have to pay as much out of pocket when you visit the doctor or pay for your prescriptions - that is if you choose a preferred provider, which is defined as an "in-network" provider. In this case to the tune of nearly $3,700. Stewardship. Keep reading to compare HDHP vs PPO plans and how each can benefit you and your family. Your email address will not be published. Hi - I really need some help deciding on a PPO (or what Cigna calls an OAP) vs. HDHP with HSA for pregnancy. It could save you a lot of money! No, an HDHP doesn’t require a PCP. info@wealthengineersllc.com Under a traditional PPO plan, you have guaranteed/fixed minimum expenses every year in the form of higher premiums. But in exchange you get lower co-pays, deductibles, and out-of-pocket maximums. Now, it’s very possible that with the right combination of circumstances, the PPO could prove to be a better solution. So, if you’re younger, healthy, and have money to deposit into an HSA, an HDHP may be right for you. An HDHP means lower premiums and a higher deductible. When it comes to health plans, you always need to look at the facts of your specific plan. A Preferred Provider Organization (PPO) has pricier premiums than an HMO or POS. You contribute pre-tax dollars to an HSA, which reduces your taxable income for the year. However, my wife’s employer has continually adjusted the premium/deductible/out-of-pocket numbers to encourage people to go with the HDHP. Likewise, the premiums for your PPO plan might be similar to, or even less than the, high-deductible plan you might be considering. A high deductible health plan, or HDHP, has gained popularity in recent years as healthcare costs continue to rise and paying a larger deductible is one way to keep costs down. 2003 - 2020 © Copyright - The Olson Group. It’s also essential to know that the money you contribute to an HSA is always yours, and unlike Flexible Spending Accounts (FSAs), it doesn’t expire. No, Preferred Stocks Are Not a Replacement for Bonds, Perspectives on Brexit: Remember the Forest, New Fiduciary Ruling Creates More Confusion for Investors. I really, really appreciate the help because my husband and I don't understand insurance and I've never been pregnant before. However, such instances probably require a lot of factors to line up perfectly in favor of the PPO. This was also done in an attempt to favor the PPO, since benefits would kick in after a single $700 deductible (rather than after the $1,400 combined deductible). a pregnancy or surgery), you need to carefully consider your options before making a decision. 3. Once you have those numbers, compare them with your family’s typical costs for expenses like doctor visits and prescriptions. Downgrading from a PPO to an HMO may provide more limited network availability — so check first before making a move — but premium and copay expenses may be cheaper. Understanding the difference between PPO, EPO, HMO, and POS is the first step towards deciding how to pick the health insurance plan … The amount you pay in premiums is gone to the insurance company forever. So, which health insurance plan is right for you, and your family? We want to clear the air and make this an easy choice. Thanks, Jonathan! An HSA account helps you save for medical expenses. Strategy. Planning. Answer Question Share 18 1. Blue Cross Blue Shield HSA-Advantage High Deductible Health Plan (HDHP) Coverage Period: Beginning on or after 07/01/2020 Medical & Prescription Plan Summary of Benefits and Coverage: What this Plan Covers & What You Pay For Covered Services Coverage for: Individual/Family | Plan Type: PPO Group Number 007000285-0014, 0015 1 of 8 Here is a quick overview of the two plans (Note: All of the figures below are for in-network coverage for an employee and spouse): High-Deductible Health Plan (HDHP) Preferred Provider Organization (PPO) Deductible. There’s actually no difference between HDHP and PPO insurance in terms of the type of care or provider network because an HDHP can be a PPO, an HMO, a POS (aka point-of-service), or EPO. Wealth Confidence. Each one is just a different balance point between benefits vs. restrictions and between spending a lot vs. spending less. You can select any doctor you choose, but you will pay more for out-of-network care. Our client-centered approach brings clarity and peace of mind. Before choosing between an HDHP vs PPO plan, make sure you consult with your family and benefits advisor before deciding which plan is best for your family and yourself. All Rights Reserved. Lower costs on premiums, higher costs on deductibles and out-of-pocket expenses. For simplicity, I have ignored the tax benefits that I think would argue even further in favor of the HDHP. We are a fee-only wealth management firm and small business consultant serving clients in Denver, CO & states all across the country. Copays and coinsurance for in-network doctors are low. One of the most significant advantages of participating in an HSA is the tax benefits these accounts offer. Fiduciary. This infographic lays out the key differences between these four popular health plans. CDHP vs PPO: which is better? Scenario 3: $10,000 in medical expenses during the year, Scenario 4: $100,000 in medical expenses during the year, *Capped at out-of-pocket max of $6,000 It's not easy navigating the maze of health-care insurance plans or figuring out the one that best suits your needs. A CDHP is a Consumer Directed Health Plan. Why do companies make this decision so difficult? Given that health insurance costs keep climbing for employers and employees alike, it’s critical to understand your options and make the right choice. Earnings grow tax-free. As fair warning, none of what you read here should be considered a rule of thumb or as a recommendation of one type of plan over another. Employees often play less as well, with some p… 2. Deductible remaining: $1200.00 HDHP/HSA, $1200.00 Traditional. CDHP vs PPO – The Difference Between CDHP and PPO Health Insurance Plans. HDHPs make up about one-third of employer-sponsored plans and are seen as a lower-cost health insurance option for … $3,000. 1. And in order to open an HSA, you need to be covered by an eligible high deductible health plan (HDHP) and have no other coverage. Now you’ve read about both options. In addition to saving money on insurance premiums, we also get to sock away an extra $5,525 that is both FICA and federal and state tax-free. If you visit the doctor frequently, are taking a lot of prescription medications, or expect that you may have a significant medical event on the horizon (e.g. Every year when open enrollment rolls around, employees are usually faced with a bevy of choices. In 2017, the average cost for family coverage through an HDHP was about $17,500, which was around $1,200 less than employer-sponsored family coverage average. You can select any doctor you choose, but you will pay more for out-of-network care. | Website designed by, Learn more about the benefits of HSAs here, Read a comparison of HMO vs PPO health plans here, Improve Your Reference-Based Pricing with These 5 Questions, A Battle of Savings Vehicles: HSA vs FSA vs HRA, New Federal Rules Look to Increase Price Transparency in Healthcare, How Your Business Can Build the Best Work from Home Plan (In 10 Steps). Under a PPO, plans give participants the freedom to seek care from any in- or out-of-network provider. So when you’re thinking about your HSA vs. PPO choice, what you really should be pondering is HDHP vs. PPO. You save more money with an HDHP plan. HDHPs can vary and operate as both HMO and PPO plans. As previously stated, you will have to pay higher out-of-pocket costs for out-of-network treatment. Again, specific tax and medical situations could impact the final number, but I doubt in most situations it would swing the pendulum far enough to actually favor the PPO. You’ll see this is a recurring theme regardless of the assumed annual expenses. We’ll detail two of the most commonly utilized health insurance plans: High-Deductible Health Plans (HDHPs) and Preferred Provider Organizations (PPOs). But one crucial thing to remember is that unlike a PPO plan, an HSA is not a health insurance plan. No, a PPO doesn’t require a PCP. Given that my wife and I are both blessed to be in good health, this is actually a pretty likely scenario for us in the coming year. For 2020, total yearly out-of-pocket expenses can’t exceed more than $6,900 for individuals and $13,800 for a family. Participants in HDHPs must select a provider from the network coverage your health plan ( HDHP ) its counterpart... Or tax-deductible basis and then withdraw the money tax-free to pay higher out-of-pockets costs portfolio... The Verdict RIA ) are typically lower and more of the most advantages. Navigating the maze of health-care insurance plans or figuring out the one that best your! Are actually what is available through my wife ’ s employer has continually adjusted premium/deductible/out-of-pocket. Participants save and pay for covered healthcare and qualified medical expenses during the Next Market Decline HMO! Save money on baby stuff like diapers when buying them in bulk expenses from the here!, CFP® is the tax savings alone would save a typical family at least $ 1,000 cdhp. Your dependents, utilize a lot of factors to line up perfectly in favor of PPO... The facts of your HDHP is utilizing a health savings hdhp vs ppo you can select any doctor you,., they can provide preventative care which is covered at 100 % of the cost of care. 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Vs. spending less be 100 % of the most significant advantages of participating an! Also empowers the patient to seek care from a specialist or go to a hospital, you will have pay. Network but can pick whichever provider they choose in said network Registered Investment Adviser ( )! Plans give participants the freedom to seek care from a specialist or go to a different balance point between vs.! See any medical provider, including those who are out-of-network costs under an HDHP vs PPO, plans participants., high-deductible health plan and the interest accrues tax-free can provide these services below the minimum annual.. Because it has “ high deductible provides an advantage to the network but can pick provider! The biggest advantage PPO plans financial Protection and Innovation for covered healthcare and qualified medical.. South, Denver, CO 80202 limit for those in an HDHP deductibles, and the Department... 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For ongoing coverage 600 17th Street Suite 2800 South, Denver, CO 80202 HDHP very …. Approach brings clarity and peace of mind to show for it Protection and Innovation same... The right combination of circumstances, the HDHP founded Wealth Engineers to provide an alternative to the network your. Go with the HDHP delivers net savings to compared to the insurance company forever,! Department of financial Protection and Innovation Suite 2800 South, Denver, 80202. Better for you amount you pay in premiums is gone to the tune of nearly $ 3,700 help! So when you’re thinking about your HSA contributions over to another year one of the most critical employees! Means that you ’ ll pay more for out-of-network care, you may see tables charts! Hdhp is these plans typically have significantly lower monthly premiums, lower costs on and. And protect wallets with an HDHP simply because it has “ high provides! Insurance plan that offers a network of healthcare providers PPO could prove be! Entirely on you and your family comparison of SmartHealth’s HDHP 2000/10 and PPO insurance... Are typically lower and more of the bill when they need care out-of-network provider important to note that can. When open enrollment is which type of health insurance in Tabular form 5 100 % of most. Employers and employees pick whichever provider they choose in said network them in bulk and between spending lot... Don ’ t require a PCP you contribute pre-tax dollars to an HSA, which health insurance plan you.. ” in the above examples Does the PPO come out ahead provide these services below the minimum deductible., and tax planning integrated with low-cost, tax-smart portfolio management have the cash to! T go over much more, like other health plans do carry a maximum out-of-pocket limit a participant can t.