HDHP always better than PPO? What am I missing?

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barnaby444
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HDHP always better than PPO? What am I missing?

Post by barnaby444 »

I'm puzzled by this. As is common, my employer gives me a choice between a cheaper high-deductible plan (HDHP) or a costlier PPO. My intuition is that the optimal plan choice should depend on how much healthcare cost I incur. But when I look at the numbers, I don't see any scenario where the PPO comes out ahead.

Here are the numbers simplified a bit for illustration (rounding and using numbers for employee+spouse for everything):

HDHP:
Annual premium: $3,500
Deductible: $5,000
Coinsurance: 30% for most things
Out-of-pocket max: $10,000
Employer contribution to HSA: $1,500

PPO:
Annual premium $7,200
Deductible: $1,500
Coinsurance: 20% for most things
Out-of-pocket max: $6,000
Employer contribution to HSA: $0

So:
  • For costs up to $1,500, the HDHP is ahead by $5,200 (the difference in premiums plus the HSA contribution).
  • From $1,500 to $5,000, the HDHP's lead narrows to $2,400 (I pay 100% in the HDHP and only 20% in the PPO, so the HDHP's lead is narrowed by 80%*$3,500=$2,800).
  • From $5,000 to $21,667, the HDHP's lead narrows to $733 (I pay 30% in HDHP and 20% in PPO, and 10%*16,667=$1,667, $2,400-$1,667 = $733).
  • At this point the HDHP has hit its OOP max, and it's still ahead, so any costs above $21,667 won't change the winner.
I'm puzzled as I would expect to be presented with a trade-off, e.g. between minimizing guaranteed costs vs. variable costs in a more healthcare-intensive scenario. But there doesn't appear to be a trade-off at all; the HDHP is always better. Even if I remove the employer HSA contribution, the PPO can only eke out ahead, which doesn't seem worth the loss of the ability to make my own HSA contributions.

We are planning for a baby in the next year or two and my wife has brought up going for the PPO just during that time given the higher expected healthcare needs, but I can't figure out how the PPO would even help.

Am I missing anything? Anyone else presented with such a "choice"?
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Re: HDHP always better than PPO? What am I missing?

Post by bombcar »

You need to compare more details than just the numbers and verify that the out-of-pocket max is the same (family) not per person, and if your employer is paying the premiums.

The PPO may have things like "child birth is covered 100%" which could be a big difference.

However, even then the HSA may be the better way to go overall, depending on your entire financial picture.
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bd7
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Re: HDHP always better than PPO? What am I missing?

Post by bd7 »

Are you quoting individual plan prices there or family plan prices?
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Re: HDHP always better than PPO? What am I missing?

Post by JBTX »

I’ve see this before where the PPO is barely any better if ever.

In your case if you absolutely maxed everything out the PPO wins by $300. ( excluding employer contribution to HSA)

Also PPO’s typically also have doctor visit copays, where HDHPS pay full visit cost or coinsurance

Finally HDHPs were often brutal with prescriptions as you pay full negotiated rates, which are typically much higher than Goodrx. A ppo you usually pay a fixed copay style payment. (This may have changed with hdhps, not sure). Then with the HDHP you are doing the calculus of getting scripts cheaper at Goodrx, but not applying against the deductible, or paying more for them and applying against deductible.

In this case id probably opt for the HDHP.
Last edited by JBTX on Mon Jun 03, 2024 3:30 pm, edited 1 time in total.
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Re: HDHP always better than PPO? What am I missing?

Post by neurosphere »

barnaby444 wrote: Mon Jun 03, 2024 3:17 pm
Am I missing anything? Anyone else presented with such a "choice"?
You're not missing anything. I do hundreds of these analyzes a year, and your experience is typical. About 95% of the time the hdhp with HSA beats the non-hsa plan regardless of expected medical spending.
If you have to ask "Is a Target Date fund right for me?", the answer is "Yes" (even in taxable accounts).
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Re: HDHP always better than PPO? What am I missing?

Post by grabiner »

The HDHP is actually even better than the measure you are using, at no additional cost to the employer. The reason is that you can max out your HSA and get an additional tax benefit. If you don't spend the money this year on medical expenses, it grows tax-free for future medical expenses, but is better than a Roth IRA because you got a deduction on the contributions.

But the situation you describe can happen, depending on the way the plans are subsidized. In particular, for US government employees, the HSA almost always comes out ahead of the conventional HMO/PPO plan from the same insurer. The reason is that the US government subsidizes 75% of the cost of most plans; if the plan contributes $1800 to your HSA, you only pay $450 to get that $1800.
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Re: HDHP always better than PPO? What am I missing?

Post by Joe Public »

If someone doesn’t have the means to pay the higher deductible amount if a medical event occurs soon after coverage begins, then PPO may initially be more advantageous from a cash flow standpoint. That’s the only thing that comes to mind at the moment.
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Re: HDHP always better than PPO? What am I missing?

Post by Afty »

One thing to consider is that health insurance premiums are paid with pretax dollars, so the difference in cost is smaller than it appears.
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barnaby444
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Re: HDHP always better than PPO? What am I missing?

Post by barnaby444 »

bd7 wrote: Mon Jun 03, 2024 3:23 pm Are you quoting individual plan prices there or family plan prices?
bombcar wrote: Mon Jun 03, 2024 3:22 pm You need to compare more details than just the numbers and verify that the out-of-pocket max is the same (family) not per person, and if your employer is paying the premiums.

The PPO may have things like "child birth is covered 100%" which could be a big difference.

However, even then the HSA may be the better way to go overall, depending on your entire financial picture.
Quoting family figures for everything; quoting only the employee portion of premiums for both plans; and there's no difference between the plans for childbirth/maternity other than the 20%/30% coinsurance difference. Both plans pay 100% for pre-natal office visits. Thanks.
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Re: HDHP always better than PPO? What am I missing?

Post by fulltilt »

bombcar wrote: Mon Jun 03, 2024 3:22 pm You need to compare more details than just the numbers and verify that the out-of-pocket max is the same (family) not per person, and if your employer is paying the premiums.

The PPO may have things like "child birth is covered 100%" which could be a big difference.

However, even then the HSA may be the better way to go overall, depending on your entire financial picture.
I agree.

The thing i would be curious about how office visits are covered. The PPO available to me is $30-50 copay for an office visit, but 0% coinsurance which makes a PPO a much better option if you have very young kids who get sick constantly. EDIT: Depending on the premium, of course.
Last edited by fulltilt on Mon Jun 03, 2024 4:56 pm, edited 1 time in total.
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Re: HDHP always better than PPO? What am I missing?

Post by SmileyFace »

The devil is often in the deails.
Example: Sometimes PPOs cover more things that are NOT subject to the deductible while the HDHP has nearly everything (maybe not yearly physical) subject to the deductible. Coinsurance for HDHP might be AFTER you meet deductible but for PPO it might be before you meet it.

Be prepared to have to actually pay the deductible.
It has been interesting to see the number of threads in recent years where people are shocked that they need to pay a big emergency room visit bill because they have an HDHP plan and have yet to meet their deductible. Years ago this simply didn't happen.

Not the difference in out of pocket max.

HDHPs are usually cheaper - until you have a bad year medically. With child birth you need to look closely.

I miss my HSA tax advantaged account - but switched back to a PPO and am back to spending little out of pocket.
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barnaby444
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Re: HDHP always better than PPO? What am I missing?

Post by barnaby444 »

fulltilt wrote: Mon Jun 03, 2024 3:57 pm
bombcar wrote: Mon Jun 03, 2024 3:22 pm You need to compare more details than just the numbers and verify that the out-of-pocket max is the same (family) not per person, and if your employer is paying the premiums.

The PPO may have things like "child birth is covered 100%" which could be a big difference.

However, even then the HSA may be the better way to go overall, depending on your entire financial picture.
I agree.

The thing i would be curious about how office visits are covered. The PPO available to me is $30-50 copay for an office visit, but 0% coinsurance which makes a PPO a much better option if you have very young kids who get sick constantly.
True, that's a detail I left out. The PPO has 0% coinsurance and only a $25/$50 copay for PCP/specialist office visits. But suppose I model that as 10% coinsurance ($25 copay for a $250 PCP visit or $50 copay for a $500 specialist visit). Even then we'd have to rack up about $15,000 in office visits alone before the PPO comes out ahead. Heck, even if I model it as 5% the breakeven point is at $12,500 in office visits.
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Re: HDHP always better than PPO? What am I missing?

Post by grabiner »

barnaby444 wrote: Mon Jun 03, 2024 4:08 pm
fulltilt wrote: Mon Jun 03, 2024 3:57 pm The thing i would be curious about how office visits are covered. The PPO available to me is $30-50 copay for an office visit, but 0% coinsurance which makes a PPO a much better option if you have very young kids who get sick constantly.
True, that's a detail I left out. The PPO has 0% coinsurance and only a $25/$50 copay for PCP/specialist office visits. But suppose I model that as 10% coinsurance ($25 copay for a $250 PCP visit or $50 copay for a $500 specialist visit). Even then we'd have to rack up about $15,000 in office visits alone before the PPO comes out ahead. Heck, even if I model it as 5% the breakeven point is at $12,500 in office visits.
The $250/500 is much more than you would normally pay under the HDHP for a visit alone. The co-pay is only for the appointment fee; a PCP bill of $250 usually also includes some charges for lab tests or X-rays which would be billed separately under most insurance.
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Re: HDHP always better than PPO? What am I missing?

Post by oldfatguy »

Which plan incentivizes you to use less healthcare services? Is that good or bad for you? There is more than money to consider.
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Re: HDHP always better than PPO? What am I missing?

Post by SmileyFace »

barnaby444 wrote: Mon Jun 03, 2024 4:08 pm
fulltilt wrote: Mon Jun 03, 2024 3:57 pm
bombcar wrote: Mon Jun 03, 2024 3:22 pm You need to compare more details than just the numbers and verify that the out-of-pocket max is the same (family) not per person, and if your employer is paying the premiums.

The PPO may have things like "child birth is covered 100%" which could be a big difference.

However, even then the HSA may be the better way to go overall, depending on your entire financial picture.
I agree.

The thing i would be curious about how office visits are covered. The PPO available to me is $30-50 copay for an office visit, but 0% coinsurance which makes a PPO a much better option if you have very young kids who get sick constantly.
True, that's a detail I left out. The PPO has 0% coinsurance and only a $25/$50 copay for PCP/specialist office visits. But suppose I model that as 10% coinsurance ($25 copay for a $250 PCP visit or $50 copay for a $500 specialist visit). Even then we'd have to rack up about $15,000 in office visits alone before the PPO comes out ahead. Heck, even if I model it as 5% the breakeven point is at $12,500 in office visits.
I am not following your logic.
With many HDHP plans (or at least the last 2 I had) you must pay the deductible before they start paying. So the first $5000 is on you. One outpatient procedure may cost you that $5000 with a HDHP - only a couple of hundred with PPO.
If you think you will have a year with only PCP office visits - sure - HDHP will win.
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Re: HDHP always better than PPO? What am I missing?

Post by bd7 »

barnaby444 wrote: Mon Jun 03, 2024 3:53 pm Quoting family figures for everything; quoting only the employee portion of premiums for both plans; and there's no difference between the plans for childbirth/maternity other than the 20%/30% coinsurance difference. Both plans pay 100% for pre-natal office visits. Thanks.
Go for the HDHP version and don't worry. We have an HDHP PPO partly because the only other options are an HMO and Kaiser. We've had major medical issues the past three years and I've maxed out the deductible each of those three years. Last year I hit the OOP max as well. However, being able to contribute to the HSA and then pay the bills gives you an effective discount of whatever your tax bracket is on that money. If you have sufficient income, you can pay the bills with other money and build your HSA.

One of the things that surprised me is how hard it was to actually hit the deductibles and OOP max. Our HDHP plan through Anthem Blue Cross ended up paying for a lot of things at no cost to us, the negotiated rates with hospitals were surprisingly low and it took 3 hospital visits and two surgeries to finally hit the $6K OOP max. Just looking at your numbers without any crunching, I think premium difference plus the employer $1500 will put you ahead in almost all circumstances--and most of the time you'll be way ahead. We've had the HDHP for 7 or 8 years now and our HSA's are pushing $30k each now as a result.
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Re: HDHP always better than PPO? What am I missing?

Post by barnaby444 »

SmileyFace wrote: Mon Jun 03, 2024 4:01 pm The devil is often in the deails.
Example: Sometimes PPOs cover more things that are NOT subject to the deductible while the HDHP has nearly everything (maybe not yearly physical) subject to the deductible. Coinsurance for HDHP might be AFTER you meet deductible but for PPO it might be before you meet it.

Be prepared to have to actually pay the deductible.
It has been interesting to see the number of threads in recent years where people are shocked that they need to pay a big emergency room visit bill because they have an HDHP plan and have yet to meet their deductible. Years ago this simply didn't happen.

Not the difference in out of pocket max.

HDHPs are usually cheaper - until you have a bad year medically. With child birth you need to look closely.

I miss my HSA tax advantaged account - but switched back to a PPO and am back to spending little out of pocket.
Yes there are a few examples of this, the main one being that the PPO deductible is waived for ER visits and it's a flat $250 copay. So a very expensive ER visit is a potential path to the PPO coming out ahead. Thanks.
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Re: HDHP always better than PPO? What am I missing?

Post by Admiral »

Suggest you compare a HDHP (and a PPO) with an HMO. It's there that you will likely see the savings over a HDHP, not comparing it to the most expensive option.

Our HMO premiums are lower than your quotes for the HDHP, and of course much, much lower than the PPO. No deductibles, just $30 copays. Or maybe tiny deductibles like a few hundred bucks. When my daughter was born she was in the NICU for a week. The billed cost to insurance was $28,000. And that was 20 years ago. Our cost was $0.

YMMV, as all plans are priced based on the size of the company. Our insurance is through a huge employer.
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Re: HDHP always better than PPO? What am I missing?

Post by SmileyFace »

Admiral wrote: Mon Jun 03, 2024 4:24 pm Suggest you compare a HDHP (and a PPO) with an HMO. It's there that you will likely see the savings over a HDHP, not comparing it to the most expensive option.

Our HMO premiums are lower than your quotes for the HDHP, and of course much, much lower than the PPO. No deductibles, just $30 copays. Or maybe tiny deductibles like a few hundred bucks. When my daughter was born she was in the NICU for a week. The billed cost to insurance was $28,000. And that was 20 years ago. Our cost was $0.

YMMV, as all plans are priced based on the size of the company. Our insurance is through a huge employer.
I am guessing the OPs company doesn't offer an HMO option. Many no longer do.
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Re: HDHP always better than PPO? What am I missing?

Post by barnaby444 »

SmileyFace wrote: Mon Jun 03, 2024 4:15 pm
barnaby444 wrote: Mon Jun 03, 2024 4:08 pm
fulltilt wrote: Mon Jun 03, 2024 3:57 pm
bombcar wrote: Mon Jun 03, 2024 3:22 pm You need to compare more details than just the numbers and verify that the out-of-pocket max is the same (family) not per person, and if your employer is paying the premiums.

The PPO may have things like "child birth is covered 100%" which could be a big difference.

However, even then the HSA may be the better way to go overall, depending on your entire financial picture.
I agree.

The thing i would be curious about how office visits are covered. The PPO available to me is $30-50 copay for an office visit, but 0% coinsurance which makes a PPO a much better option if you have very young kids who get sick constantly.
True, that's a detail I left out. The PPO has 0% coinsurance and only a $25/$50 copay for PCP/specialist office visits. But suppose I model that as 10% coinsurance ($25 copay for a $250 PCP visit or $50 copay for a $500 specialist visit). Even then we'd have to rack up about $15,000 in office visits alone before the PPO comes out ahead. Heck, even if I model it as 5% the breakeven point is at $12,500 in office visits.
I am not following your logic.
With many HDHP plans (or at least the last 2 I had) you must pay the deductible before they start paying. So the first $5000 is on you. One outpatient procedure may cost you that $5000 with a HDHP - only a couple of hundred with PPO.
If you think you will have a year with only PCP office visits - sure - HDHP will win.
Yes the first $5,000 is on me with HDHP, but the PPO is $3,700 higher in premiums alone and doesn't have the $1,500 in employer HSA money. Those more than offset the difference in deductibles.
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Re: HDHP always better than PPO? What am I missing?

Post by Northern Flicker »

A HDHP can be a PPO, EPO, or HMO, and may or may not be HSA-eligible. HSA-eligible plans often are more cost effective than non-HSA-eligible plans, but you have to compare specific plans in the context of the specific health status of the insured.
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Re: HDHP always better than PPO? What am I missing?

Post by fulltilt »

barnaby444 wrote: Mon Jun 03, 2024 4:08 pm
fulltilt wrote: Mon Jun 03, 2024 3:57 pm
bombcar wrote: Mon Jun 03, 2024 3:22 pm You need to compare more details than just the numbers and verify that the out-of-pocket max is the same (family) not per person, and if your employer is paying the premiums.

The PPO may have things like "child birth is covered 100%" which could be a big difference.

However, even then the HSA may be the better way to go overall, depending on your entire financial picture.
I agree.

The thing i would be curious about how office visits are covered. The PPO available to me is $30-50 copay for an office visit, but 0% coinsurance which makes a PPO a much better option if you have very young kids who get sick constantly.
True, that's a detail I left out. The PPO has 0% coinsurance and only a $25/$50 copay for PCP/specialist office visits. But suppose I model that as 10% coinsurance ($25 copay for a $250 PCP visit or $50 copay for a $500 specialist visit). Even then we'd have to rack up about $15,000 in office visits alone before the PPO comes out ahead. Heck, even if I model it as 5% the breakeven point is at $12,500 in office visits.
EDIT: What about prescription drugs? How do those two compare in the two plans?

Having kids changes the equation quite a bit in my experience. It is very stressful and you, or your wife, might find themselves in a situation where they are in need of mental health services (counseling) which can be very expensive. Plus, you never know what the health of the baby will be and all of that.

Health insurance is insurance and i would be more comfortable paying a known fixed amount each month during the pregnancy and in the first year or two afterwards. That's just me and my risk tolerance. Really, it comes down to your personal situation and ability to tolerate risk. I wouldn't say one is definitely right or definitely wrong.
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Re: HDHP always better than PPO? What am I missing?

Post by bd7 »

SmileyFace wrote: Mon Jun 03, 2024 4:15 pm One outpatient procedure may cost you that $5000 with a HDHP - only a couple of hundred with PPO.
I don't see how the PPO would only be "a couple of hundred" for a significant procedure with a negotiated rate of over $5000. Say you have a surgery that the hospital bills $140k for and the insurance-negotiated rate is $35k all-in. Either plan would reach the OOP max--6k vs 10k--but you'd have $5200 extra in your HSA due to the employer contribution and the premium savings.
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Re: HDHP always better than PPO? What am I missing?

Post by Beachey »

neurosphere wrote: Mon Jun 03, 2024 3:28 pm
barnaby444 wrote: Mon Jun 03, 2024 3:17 pm
Am I missing anything? Anyone else presented with such a "choice"?
You're not missing anything. I do hundreds of these analyses a year, and your experience is typical. About 95% of the time the hdhp with HSA beats the non-hsa plan regardless of expected medical spending.
This has also been my experience where the HDHP plan is cheaper than the PPO for my last few employers. One thing to understand is whether prescription costs are included. I have seen some cases where there is an intermediate case where the PPO may be slightly cheaper for a certain level of spending and then flip back for maximum expenditure. It is best to try and model your actual typical spending. And then a worst case such as having a baby. The other issue sometimes with pregnancy is it can stretch over two years so it is best to understand how your OB/GYN bills

But I think people many people only pick a PPO because the big OOP number scares them and they don't realize that they are paying that anyway in their payroll deduction.
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Re: HDHP always better than PPO? What am I missing?

Post by chassis »

neurosphere wrote: Mon Jun 03, 2024 3:28 pm
barnaby444 wrote: Mon Jun 03, 2024 3:17 pm
Am I missing anything? Anyone else presented with such a "choice"?
You're not missing anything. I do hundreds of these analyzes a year, and your experience is typical. About 95% of the time the hdhp with HSA beats the non-hsa plan regardless of expected medical spending.
Agree with barnaby and neurosphere.

It’s insurance.

Your employer is steering you towards what is best for them.

You have done the math, which few people do, and have learned the truth.

PPO gives some people “peace of mind” so they “can sleep at night”. In other words, have less fear.

Less fear costs more money, with regard to insurance.

Nothing is predictable in life, but most things are estimable and forecastable, as @barnaby has correctly done.

The approaches being discussed in this thread can be applied to annuities, life insurance, extended warranties, the list goes on.
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Re: HDHP always better than PPO? What am I missing?

Post by Ret2018 »

The only thing I have to add is to be sure to double check that the PPO and HDHP plan networks are the same, or very similar; coverage for out of network care is similar (at some percentage of usual and customary payments); and that both countout of network costs towards the deductible and OOP limits.
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Re: HDHP always better than PPO? What am I missing?

Post by Buzzman »

I've done this analysis a couple of times and have come to the same conclusion as you. You can pay a lot of OOP costs for the typical $1000 a month in extra premiums for the PPO. If you are young and healthy I don't see a downside to the HDHP.

In my case I had a previous employer that gave us extra money to fund our HSA account. We maxed that out every year it was offered until I left that job. The next employer had traditional PPO insurance but I still had the HSA account with those dollars from the previous employer and we used it to pay deductibles, etc. When I retired from my last employer I looked hard at going on an ACA HDHP but due to couple of health issues and fear of the unknown I opted to pay for the CORBA insurance which cost about $300 more per month. The COBRA ran out in May this year and now we are on an ACA HSA allowable plan. I will go on Medicare in January and the wife will stay on the ACA HSA plan for a few more years. Now we have about $28k in our HSA to cover any deductibles and OOP expenses until we hit the max each year.

Even if go with the HDHP then back on PPO during the baby years you would still have those HSA dollars to use for co-pays and OOP items,
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Re: HDHP always better than PPO? What am I missing?

Post by SmileyFace »

Buzzman wrote: Mon Jun 03, 2024 5:03 pm You can pay a lot of OOP costs for the typical $1000 a month in extra premiums for the PPO.
Extra $300 for the OP.
Extra $1000 - I have never seen that much - definitely flips the scales. (I pay $0 extra for my PPO - but I know that may be unusual).
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Re: HDHP always better than PPO? What am I missing?

Post by aristotelian »

Our HDHP is similar. Sometimes there are free lunches. Take it.
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Re: HDHP always better than PPO? What am I missing?

Post by aristotelian »

Northern Flicker wrote: Mon Jun 03, 2024 4:29 pm A HDHP can be a PPO, EPO, or HMO, and may or may not be HSA-eligible. HSA-eligible plans often are more cost effective than non-HSA-eligible plans, but you have to compare specific plans in the context of the specific health status of the insured.
As far as I know, the HSA was specifically designed for HDHP's. I don't see any language suggesting an HDHP might not be HSA eligible. Where are you getting this?

OP laid out numbers in detail for their case.
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Re: HDHP always better than PPO? What am I missing?

Post by sailaway »

aristotelian wrote: Mon Jun 03, 2024 6:01 pm
Northern Flicker wrote: Mon Jun 03, 2024 4:29 pm A HDHP can be a PPO, EPO, or HMO, and may or may not be HSA-eligible. HSA-eligible plans often are more cost effective than non-HSA-eligible plans, but you have to compare specific plans in the context of the specific health status of the insured.
As far as I know, the HSA was specifically designed for HDHP's. I don't see any language suggesting an HDHP might not be HSA eligible. Where are you getting this?

OP laid out numbers in detail for their case.
There are high deductible plans that have too high an out of pocket maximum to qualify for an HSA. There are also plans that are considered high deductible, but cover something or other that isn't allowed for HSA purposes. Basically, if a plan doesn't explicitly say it is HSA eligible, it probably isn't, but you might have to go through a couple of points to figure out why.
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Re: HDHP always better than PPO? What am I missing?

Post by OrangeKiwi »

sailaway wrote: Mon Jun 03, 2024 6:13 pm
aristotelian wrote: Mon Jun 03, 2024 6:01 pm
Northern Flicker wrote: Mon Jun 03, 2024 4:29 pm A HDHP can be a PPO, EPO, or HMO, and may or may not be HSA-eligible. HSA-eligible plans often are more cost effective than non-HSA-eligible plans, but you have to compare specific plans in the context of the specific health status of the insured.
As far as I know, the HSA was specifically designed for HDHP's. I don't see any language suggesting an HDHP might not be HSA eligible. Where are you getting this?

OP laid out numbers in detail for their case.
There are high deductible plans that have too high an out of pocket maximum to qualify for an HSA. There are also plans that are considered high deductible, but cover something or other that isn't allowed for HSA purposes. Basically, if a plan doesn't explicitly say it is HSA eligible, it probably isn't, but you might have to go through a couple of points to figure out why.
According to my interpretation, HDHP is a term specifically used to describe a health plan that qualifies someone to be able to contribute to an HSA.

https://www.irs.gov/publications/p969#e ... 1000204030
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Re: HDHP always better than PPO? What am I missing?

Post by aristotelian »

sailaway wrote: Mon Jun 03, 2024 6:13 pm
aristotelian wrote: Mon Jun 03, 2024 6:01 pm
Northern Flicker wrote: Mon Jun 03, 2024 4:29 pm A HDHP can be a PPO, EPO, or HMO, and may or may not be HSA-eligible. HSA-eligible plans often are more cost effective than non-HSA-eligible plans, but you have to compare specific plans in the context of the specific health status of the insured.
As far as I know, the HSA was specifically designed for HDHP's. I don't see any language suggesting an HDHP might not be HSA eligible. Where are you getting this?

OP laid out numbers in detail for their case.
There are high deductible plans that have too high an out of pocket maximum to qualify for an HSA. There are also plans that are considered high deductible, but cover something or other that isn't allowed for HSA purposes. Basically, if a plan doesn't explicitly say it is HSA eligible, it probably isn't, but you might have to go through a couple of points to figure out why.
Those plans would not be captial-HDHP even if they have high deductibles. Per the IRS, if you have an HDHP you are eligible. It is true that the IRS goes on to define HDHP with more criteria than the deductible
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Re: HDHP always better than PPO? What am I missing?

Post by RyeBourbon »

OrangeKiwi wrote: Mon Jun 03, 2024 6:24 pm
sailaway wrote: Mon Jun 03, 2024 6:13 pm
aristotelian wrote: Mon Jun 03, 2024 6:01 pm
Northern Flicker wrote: Mon Jun 03, 2024 4:29 pm A HDHP can be a PPO, EPO, or HMO, and may or may not be HSA-eligible. HSA-eligible plans often are more cost effective than non-HSA-eligible plans, but you have to compare specific plans in the context of the specific health status of the insured.
As far as I know, the HSA was specifically designed for HDHP's. I don't see any language suggesting an HDHP might not be HSA eligible. Where are you getting this?

OP laid out numbers in detail for their case.
There are high deductible plans that have too high an out of pocket maximum to qualify for an HSA. There are also plans that are considered high deductible, but cover something or other that isn't allowed for HSA purposes. Basically, if a plan doesn't explicitly say it is HSA eligible, it probably isn't, but you might have to go through a couple of points to figure out why.
According to my interpretation, HDHP is a term specifically used to describe a health plan that qualifies someone to be able to contribute to an HSA.

https://www.irs.gov/publications/p969#e ... 1000204030
Having a high deductible is not sufficient to qualify as HSA-eligible. Some people just look at the deductible and assume it is HSA-eligible. There are other requirements.
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Re: HDHP always better than PPO? What am I missing?

Post by Northern Flicker »

Not the least of the other requirements for a plan to be HSA-eligible is that the plan must be designated as HSA-eligible. Thus, whether or not a plan has that designation is all you need to consider when deciding if a plan is HSA-eligible.
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Re: HDHP always better than PPO? What am I missing?

Post by Northern Flicker »

aristotelian wrote: Mon Jun 03, 2024 6:01 pm
Northern Flicker wrote: Mon Jun 03, 2024 4:29 pm A HDHP can be a PPO, EPO, or HMO, and may or may not be HSA-eligible. HSA-eligible plans often are more cost effective than non-HSA-eligible plans, but you have to compare specific plans in the context of the specific health status of the insured.
As far as I know, the HSA was specifically designed for HDHP's. I don't see any language suggesting an HDHP might not be HSA eligible. Where are you getting this?
All HSA-eligible plans are high deductible plans. Whether a plan is a HDHP and whether it is HSA-eligible, are separate considerations from whether it is a PPO, EPO, or HMO.

But there are HDHP's that are not HSA-eligible. There are limits on OOP max to be HSA-eligible for instance. And some HDHP's have copays for doctor visits not subject to deductible, also precluding it being HSA-eligible.
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Re: HDHP always better than PPO? What am I missing?

Post by SmileyFace »

Northern Flicker wrote: Mon Jun 03, 2024 7:32 pm Not the least of the other requirements for a plan to be HSA-eligible is that the plan must be designated as HSA-eligible. Thus, whether or not a plan has that designation is all you need to consider when deciding if a plan is HSA-eligible.
All of this side discussion is completely irrelevant to the OPs questions.
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Re: HDHP always better than PPO? What am I missing?

Post by Northern Flicker »

SmileyFace wrote: Mon Jun 03, 2024 7:49 pm
Northern Flicker wrote: Mon Jun 03, 2024 7:32 pm Not the least of the other requirements for a plan to be HSA-eligible is that the plan must be designated as HSA-eligible. Thus, whether or not a plan has that designation is all you need to consider when deciding if a plan is HSA-eligible.
All of this side discussion is completely irrelevant to the OPs questions.
Not necessarily-- expected total out of pocket cost is not the only criterion for choosing a plan.
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Re: HDHP always better than PPO? What am I missing?

Post by SmileyFace »

Northern Flicker wrote: Mon Jun 03, 2024 7:54 pm
SmileyFace wrote: Mon Jun 03, 2024 7:49 pm
Northern Flicker wrote: Mon Jun 03, 2024 7:32 pm Not the least of the other requirements for a plan to be HSA-eligible is that the plan must be designated as HSA-eligible. Thus, whether or not a plan has that designation is all you need to consider when deciding if a plan is HSA-eligible.
All of this side discussion is completely irrelevant to the OPs questions.
Not necessarily-- expected total out of pocket cost is not the only criterion for choosing a plan.
OP has two plan options that have been outlined - an HSA eligible HDHP and a nonHSA PPO option. Stated up front. Defining HSA eligibility and bringing up HMOs and EPOs is kind of unnecessary. Why not just address the OPs 2 options?
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Re: HDHP always better than PPO? What am I missing?

Post by Northern Flicker »

The OP did not provide info to do that, but understanding what a PPO is, what an HDHP is, and what an HSA-eligible plan is would be beneficial.
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Re: HDHP always better than PPO? What am I missing?

Post by SmileyFace »

Northern Flicker wrote: Mon Jun 03, 2024 8:08 pm The OP did not provide info to do that, but understanding what a PPO is, what an HDHP is, and what an HSA-eligible plan is would be beneficial.
OP could google those definitions if desired.
This side discussion you started is not at all what was asked. And now I am guilty of a reply all to the person doing the reply all so will stop with this irrelevant back and forth now. 🙃
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Re: HDHP always better than PPO? What am I missing?

Post by aristotelian »

Northern Flicker wrote: Mon Jun 03, 2024 7:47 pm
aristotelian wrote: Mon Jun 03, 2024 6:01 pm
Northern Flicker wrote: Mon Jun 03, 2024 4:29 pm A HDHP can be a PPO, EPO, or HMO, and may or may not be HSA-eligible. HSA-eligible plans often are more cost effective than non-HSA-eligible plans, but you have to compare specific plans in the context of the specific health status of the insured.
As far as I know, the HSA was specifically designed for HDHP's. I don't see any language suggesting an HDHP might not be HSA eligible. Where are you getting this?
All HSA-eligible plans are high deductible plans. Whether a plan is a HDHP and whether it is HSA-eligible, are separate considerations from whether it is a PPO, EPO, or HMO.

But there are HDHP's that are not HSA-eligible. There are limits on OOP max to be HSA-eligible for instance. And some HDHP's have copays for doctor visits not subject to deductible, also precluding it being HSA-eligible.
The IRS defines HDHP.as HSA eligible and vice versa. The OOP Max is one of the criteria in addition to the deductible. However, any plan that meets the criteria of HDHP is HSA eligible.
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Re: HDHP always better than PPO? What am I missing?

Post by sailaway »

OP, there are a number of reasons that an employer might set things up this way. They might offer a legacy plan because it is important to some or has some specific specialists, but then do everything in their power to encourage new employees towards another plan.

You might be seeing an effort to either meet a very niche need while incentivizing the HSA or an effort to phase out a certain type of plan.
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Re: HDHP always better than PPO? What am I missing?

Post by evancox10 »

Does employer self insure? Note that if you model everyone as purely rational actors, an HDHP should encourage less consumption of medical services. So the HDHP may actually cost the employer less in overall premiums/payments, and they can afford to direct some of that savings to making the HDHP more attractive. When the HDHP is more attractive, more employees should (in theory) choose it, and the employer saves money with each employee that chooses HDHP over non-HDHP.
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Re: HDHP always better than PPO? What am I missing?

Post by Northern Flicker »

To bring this back to the original question, a PPO generally has coverage for out of network care, but at less generous levels than for in network care. An EPO or HMO may have no coverage for out of network care and a narrower network than that of an EPO or HMO. The OP did not specify whether the HDHP was a PPO, EPO, or HMO plan, but consideration of the networks is salient, not just the cost. Another difference is that EPO's and HMO's most often require a referral from a PCP to see a specialist, and the insurer has to approve it. With a PPO, the insured person can just go see any chosen provider and have it covered, subject to the reimbursement levels for being in or out of network.
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Re: HDHP always better than PPO? What am I missing?

Post by Charon »

grabiner wrote: Mon Jun 03, 2024 4:12 pm The $250/500 is much more than you would normally pay under the HDHP for a visit alone.
No, it's not. Brief, low-MDM visits with PCPs in my area (MCOL) are ~$250. (Including PA visits, not just MDs.) Any sort of complication at all can quickly jack that up. And in a different part of the country around 12 years ago I had a very brief visit with an orthopedist that involved no tests, not even any examination, for which I was billed $800 (and remember, this was 12 years ago).

On the other hand, I went to the ER in New Zealand and paid absolutely nothing. If I'd had to pay out of pocket, and with no insurance, it would have been a few hundred dollars (prices were posted, easily visible in advance).

The medical system in the US is massively screwed up.

To the OP, yes, I found this same situation with my plans, and went with the HDHP as a result. The one negative is psychological. If you pay significantly per visit, it can make you reluctant to seek medical care, even if you can well afford it and you know it's cheaper than the low-deductible plan.
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Re: HDHP always better than PPO? What am I missing?

Post by Northern Flicker »

aristotelian wrote: Mon Jun 03, 2024 8:42 pm The IRS defines HDHP.as HSA eligible and vice versa.
That does now seem to be the case. It was not the case in the recent past.
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Re: HDHP always better than PPO? What am I missing?

Post by CFM300 »

barnaby444 wrote: Mon Jun 03, 2024 3:17 pm I can't figure out how the PPO would even help.
...
Am I missing anything?
You don't say whether the HDHP is an HMO, PPO, or something else. If the HDHP is an HMO, then you might find that it has a much smaller network of doctors and facilities than the PPO, and that it provides no out-of-network coverage, except for emergencies. It might also require referrals from your primary doctor in order to see specialists.
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Re: HDHP always better than PPO? What am I missing?

Post by aristotelian »

Northern Flicker wrote: Mon Jun 03, 2024 11:20 pm
aristotelian wrote: Mon Jun 03, 2024 8:42 pm The IRS defines HDHP.as HSA eligible and vice versa.
That does now seem to be the case. It was not the case in the recent past.
The law states simply that you have to have an HDHP and then goes on to define HDHP. If you know of anything otherwise please provide details.
https://www.irs.gov/publications/p969#e ... 1000204030

The OP also mentions an employer HSA contribution so I don't think they have anything to worry about.
Last edited by aristotelian on Tue Jun 04, 2024 8:15 am, edited 1 time in total.
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Re: HDHP always better than PPO? What am I missing?

Post by barnaby444 »

Addressing a few questions:
  • Type of plan: The HDHP seems to be a PPO too (however i'll keep referring to the other plan as "the PPO" for consistency). Both plans have the same networks and same in-/out-of-network structure with separate coinsurance rates and deductibles for out-of-network. I didn't list those in the summary for simplicity; bottom line is both plans strongly incentivize going in-network.
  • Prescription drugs: The deductible is waived on the PPO but not on the HDHP, except for some common preventative drugs. After that the coverage is the same. I don't think this makes a difference in my calculations, because even if I spent $5k on uncovered drugs, the HDHP would still be slightly ahead based on the lower premiums and the HSA grant.
  • Yes, the HDHP is HSA eligible.
Thanks all for the inputs, this is very informative.
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