HDHP vs PPO - double check me please!

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SesameHiker
Posts: 21
Joined: Wed Apr 21, 2021 1:09 pm

HDHP vs PPO - double check me please!

Post by SesameHiker »

I think the HDHP works out financially better but this seems odd so can someone double check me here and tell me if I'm missing something?

My child and I are on a high deductible health plan (HDHP) through my employer making us eligible for the family contribution to an HSA, and my husband is getting an employee-only plan through his employer. My husband has the choice between a PPO and HDHP, which both seem to have the same network of physicians. I figured we'd get the PPO for him because we don't need him enrolled in an HDHP to make the family HSA contribution, but the math may weirdly be that the HDHP is better?

HDHP, for individual, in network:
Premium cost: $52/month; $624/year
Deductible: $2000
Coinsurance: 20% member / 80% plan
Out of pocket max: $6,500
Employer contribution to HSA: $40/month; $480/year

PPO, for individual, in network:
Premium cost: $164/month; $1,968/year
Deductible: $1500
Coinsurance: 20% member / 80% plan
Out of pocket max: $5000
Copay: $25 for primary care physician; $75 specialist

Prescription, hospital, and imaging costs look the same: deductible plus 20% coinsurance.

So to summarize: the HDHP costs $1344 less per year in premiums and there's a $480/year employer contribution, so the HDHP costs $1824 less per year than the PPO.

If we had just a couple physician visits, the PPO cost would be pretty small in copays whereas the HDHP might be $1000 out of pocket, but the cheaper premiums would favor the HDHP.

If we had a moderate amount of expenses with a couple thousand dollars of procedures, we'd have copays on the PPO plus the $1500 deductible before moving to 80/20 split, and on the HDHP we'd have the $2000 deductible before moving to the 80/20 split. With the cheaper premiums I think the HDHP would still be the winner.

If we maxed out, which is unlikely, the cost difference in the premiums makes up for the difference in the out of pocket max. So for the PPO we'd have copays plus $1500 plus the 80/20 split, and for the HDHP we'd have $2000 plus the 80/20 split, which would put the HDHP just a little more expensive.

Am I missing something here? I would never have expected the HDHP to work out in our favor when ignoring the tax benefit of the HSA.
md80only
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Joined: Fri Dec 11, 2020 8:39 pm

Re: HDHP vs PPO - double check me please!

Post by md80only »

At my work the HDHP is also the better plan, even if you max out.

You also need to take into consideration that your own contributions to the HSA are tax deductible. So if you put in $3k in the 25% tax bracket, you saved another $750.

In your plans at max ...
PPO = $5k + 1968 premiums = $6,968.
HDHP = $6.5k + 624 premiums - 480 = $6,644.

At least that's how it works in mine, deductibles and all expenses count towards max out of pocket, so if you are calculating doomsday you just need to look at max out of pocket plus premiums less the HSA kicker.

This is before any savings you get from not having to pay taxes on your HSA contributions.
Topic Author
SesameHiker
Posts: 21
Joined: Wed Apr 21, 2021 1:09 pm

Re: HDHP vs PPO - double check me please!

Post by SesameHiker »

Very helpful, md80only. That seems to confirm that at max the HDHP on my husband's plan is cheaper. Thank you!

In our case since we qualify for the family contribution to the HSA from my son and me being on a HDHP through my employer, this isn't a factor in the decision of my husband's plan, but it is definitely why we are opting into the HDHP under my employer.
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Metsfan91
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Re: HDHP vs PPO - double check me please!

Post by Metsfan91 »

HDHP is better. You got it right.
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oldcomputerguy
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Re: HDHP vs PPO - double check me please!

Post by oldcomputerguy »

This topic is now in the Personal Finance forum (insurance question).
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slow n steady
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Re: HDHP vs PPO - double check me please!

Post by slow n steady »

I look at all the variables but a big one I look at is the out of pocket max. It is 1500 higher for the hdhp, but you are saving/making 1800 from the premiums/employer contributions. The hdhp appears to be the winner. In some edge cases, the plans treat prescriptions very differently, so look into that if your spouse gets a lot of meds.

Also, remember the HSA contribution limit includes your employer and your spouses employer contributions. You need make sure you don't go over the limit. Your employer doesn't know about your spouses employer contributions so they wouldn't stop you from doing so.
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