PPO vs HSA

[quizzer25]

I was in PPO plan till this year. I looked at HSA option. can you all tell me if HSA will make a better sense. Family plan.

PCP visits this year - 6
Specialist - 4
Labs - 4
Pharmacy - $600

Med Parameters HSA PPO
Ded 1500/3000 500/1000
OOP Max 5000/10000 4000/8000
PCP 80% after ded $20 copay
Specialist 80% after ded $35 copay
Xray/Lab 80% after ded $0 copay
Imaging 80% after ded 90% after ded
Inpatient 80% after ded 90% after ded
Outpatient 80% after ded $200 Copay
Urgent Care 80% after ded $35 Copay
Emergency 80% after ded $200 Copay
Mthly premium $200 $500
Company Cont $2,000 NA

[tashnewbie]

If I were you, I'd make estimates of your spend with low, medium, moderate, and high levels of usage of health services. I can't tell from the visit info you've provided how that would be categorized (for example, were all of the PCP visits wellness/preventative, which would be 100% covered by insurance?). Also get an estimate of what pharmacy costs would be with the HSA (drug prices may be much higher than you're used to paying).

Low: below the deductible for each
Medium: at the deductible for each
Moderate: somewhere between the deductible and OOP max for each
High: OOP max for each

Quick assessment: it looks like with spend at deductible or OOP max, you'd spend $2k more under HSA but you'd save $3.6k in premiums, which favors the HSA to the tune of $1.6k, plus you'd get the $2k employer contribution to the HSA and whatever tax benefit from your HSA contribution. I may be looking at this incorrectly, but I think the net savings from the HSA premiums means the HSA will probably always win out. I would double check that.

[csmath]

Few things:

You can have a Low Deductible Health Care Plan (LDHP) that is PPO and High Deductible Health Care Plan (HDHP) that is PPO. PPO and HDHP are not mutually exclusive.

The below recommendation is probably the "go-to" method to evaluate your options. Quoting FiveK here:

It can be difficult to make an exact comparison, and as already noted there can be some guesswork involved, but it might be worth putting your numbers into a couple of comparison tools, e.g., Health Savings Account (HSA) vs. Traditional Health Plan and the 'HDHP Analysis' tab of the personal finance toolbox spreadsheet.

I have to agree with tashnewbie that your available HDHP PPO plan appears to be a no-brainer. If you plan on contributing to the HSA beyond your employer's contribution (max is recommended) then the deal only gets sweeter when you start looking at tax savings. A few years ago I took the dive into better understanding my LDHP vs HDHP options and wanted to visually be able to see the impact of a few different variables. This is what I came up with: viewtopic.php?t=295181. I liked to be able to see as many possible outcomes all at once and it allows you to not only get a feel for what levels of medical expenses approach the threshold of one plan becoming better than the other but it also estimates the different magnitudes of benefit.

[DeliberateDonkey]

You can have a Low Deductible Health Care Plan (LDHP) that is PPO and High Deductible Health Care Plan (HDHP) that is PPO. PPO and HDHP are not mutually exclusive.

Are you sure about that? HDHP plans aren't defined strictly by their deductibles. To my understanding, they are not allowed to provide any benefits (other than preventable and remote care services) until their deductible is met. PPO plans are defined largely by their fixed copayments, which HSA-eligible HDHP plans cannot offer for the vast majority of services.

OP should probably go ahead and pull their EOB documents from the past year to get a better idea of what those visits will cost them under the HDHP. I agree that it's almost certainly the better option, but hard to say without all the details.

[csmath]

You can have a Low Deductible Health Care Plan (LDHP) that is PPO and High Deductible Health Care Plan (HDHP) that is PPO. PPO and HDHP are not mutually exclusive.

Are you sure about that? HDHP plans aren't defined strictly by their deductibles. To my understanding, they are not allowed to provide any benefits (other than preventable and remote care services) until their deductible is met. PPO plans are defined largely by their fixed copayments, which HSA-eligible HDHP plans cannot offer for the vast majority of services.

OP should probably go ahead and pull their EOB documents from the past year to get a better idea of what those visits will cost them under the HDHP. I agree that it's almost certainly the better option, but hard to say without all the details.

Yep, pretty confident. PPO stands for Preferred Provider Organization and has more to do with what providers are considered in-network and usually has more options when compared to Health Maintenance Organization (HMO) in-network providers. HDHP's can be HMO or PPO. Non-HDHP's, or LDHP's can can be HMO or PPO too.

The OP isn't making an uncommon mistake. In my experience the vast majority of people I've overheard or directly been in conversations with regarding open enrollment choices say "HDHP vs PPO" when they are likely comparing LDHP PPO vs HDHP PPO. In fact, I bet a search of HDHP vs PPO on this very site shows a ton of hits with that exact comparison. Maybe more people say HSA vs PPO though, which is the same issue in my opinion.

[tbone555]

This is correct. I have a HDHP and there is a deductible for in PPO network and a separate, higher deductible for out of PPO network.

An HDHP allows you to contribute to an HSA.

[bighatnohorse]

I travel around the states a lot. When I had an HMO it meant that anytime I needed health care that I had to use an emergency department. No Bueno.
With a PPO I can select doctors based on their acceptance of my medical plan - which most do.
So . . . for me, a PPO make more sense.
However, an HMO might be a better choice financially if I were a home body.

[Jags4186]

It’s unlikely that the LDHP will come out less expensive. But budget a few $100/mo for medical expenses.

Your healthcare options are far superior to mine.

[marcopolo]

You can have a Low Deductible Health Care Plan (LDHP) that is PPO and High Deductible Health Care Plan (HDHP) that is PPO. PPO and HDHP are not mutually exclusive.

Are you sure about that? HDHP plans aren't defined strictly by their deductibles. To my understanding, they are not allowed to provide any benefits (other than preventable and remote care services) until their deductible is met. PPO plans are defined largely by their fixed copayments, which HSA-eligible HDHP plans cannot offer for the vast majority of services.

OP should probably go ahead and pull their EOB documents from the past year to get a better idea of what those visits will cost them under the HDHP. I agree that it's almost certainly the better option, but hard to say without all the details.

Asking to compare PPO vs. HSA is like asking if you want
a blue car or Honda.

PPO refers to the type of network access, a provider network where you can go see anyone in the network as compared to an HMO plan where your primary acts as a gate keeper, or an indemnity plan where you can go to any provider regardless of network.

HSA eligible plans simply allows you to save money in an HSA account, there are several requirements a plan must meet to qualify, including certain minimum deductibles. It has nothing to do with provider access rules.

A plan can have PPO network access and still have HSA eligibility, we have one of those. Or a plan might not have either, or any combination at all.

So, when comparing the plans one should also look at network coverage types in addition to the cost profile.

if they both give you access to same network, then just looking at the various costs may be sufficient.

But, for example, if the HSA eligible plan happens to be a HMO type plan with strict access to narrow network, while the PPO is a nationwide plan with a vast network, there may be other considerations rather than just the associated deductibles/copay/oop, etc.

We should have a sticky thread explaining this, it seems to come up every year around benefit sign up time.

[celia]

To add on to the previous post, the HSA is not a medical group. It is not insurance either. It is irrelevant to any medical care you receive.

What it is, is a Health Savings Account. That is all. You or your employer can put money in and when you withdraw from it, the withdrawal is meant to pay you back for a medical expense you just incurred that your insurance won’t cover.

Some Bogleheads use their Health Savings Account like another retirement account. They contribute to the account (with their money or from the employer). Meanwhile, they keep paying the medical bills out of pocket until they reach the high deductible their insurance plan has (before the insurance company starts to pay). Then, in retirement, they have lots of money they can use to pay their medical bills. (Or they can pay themself back for those medical receipts they saved over the years when they paid the bill out of pocket.) Either way, the growth is tax-free as long as the distributions are used to pay off medical bills that medical insurance didn’t cover.

This works out best for those who are healthy and thus don’t have big medical bills. Since the insurance company won’t pay a bill of theirs until they met the deductible, both parties come out ahead and the money just continues to grow in the HSA each year. But if their medical expenses are more than the deductible and they plan to pay it off from the HSA, they would have been better off getting an insurance plan with a low deductible, since they are just contributing to the HSA and then pulling it out the same year.


To summarize, everyone needs medical care at some point and should at least see their doctor yearly to prevent anything that the patient may not be aware of. This can help keep you healthy (and prevent some large medical bills).

Everyone should have medical insurance in case a huge medical expense occurs. Something as common as a car accident can land someone in the hospital unexpectedly.

Some people may chose a Health Savings Account to help supplement their medical insurance in the current or a future year. But the HSA is not medical insurance. It is just a secondary source of money saved up to pay the part of medical bills that are not paid off by the medical insurance.

[ModifiedDuration]

To add on to the previous post, the HSA is not a medical group. It is not insurance either. It is irrelevant to any medical care you receive.

What it is, is a Health Savings Account. That is all. You or your employer can put money in and when you withdraw from it, the withdrawal is meant to pay you back for a medical expense you just incurred that your insurance won’t cover.

Some Bogleheads use their Health Savings Account like another retirement account. They contribute to the account (with their money or from the employer). Meanwhile, they keep paying the medical bills out of pocket until they reach the high deductible their insurance plan has (before the insurance company starts to pay). Then, in retirement, they have lots of money they can use to pay their medical bills. (Or they can pay themself back for those medical receipts they saved over the years when they paid the bill out of pocket.) Either way, the growth is tax-free as long as the distributions are used to pay off medical bills that medical insurance didn’t cover.

This works out best for those who are healthy and thus don’t have big medical bills. Since the insurance company won’t pay a bill of theirs until they met the deductible, both parties come out ahead and the money just continues to grow in the HSA each year. But if their medical expenses are more than the deductible and they plan to pay it off from the HSA, they would have been better off getting an insurance plan with a low deductible, since they are just contributing to the HSA and then pulling it out the same year.


To summarize, everyone needs medical care at some point and should at least see their doctor yearly to prevent anything that the patient may not be aware of. This can help keep you healthy (and prevent some large medical bills).

Everyone should have medical insurance in case a huge medical expense occurs. Something as common as a car accident can land someone in the hospital unexpectedly.

Some people may chose a Health Savings Account to help supplement their medical insurance in the current or a future year. But the HSA is not medical insurance. It is just a secondary source of money saved up to pay the part of medical bills that are not paid off by the medical insurance.

Of course, in order to be able to contribute to a Health Savings Account in a particular year, one must first have a High-Deductible Health Plan (HDHP), as defined by the IRS.

See section on “Qualifying for an HSA Contribution” in IRS Publication 969:

https://www.irs.gov/publications/p969#e ... 1000204037

[JBTX]

One wild card in comparing HDHP vs PPO plans is prescriptions. In an HDHP plan you are going to be charged the full insurance negotiated rates for the meds until you hit the deductible. These prices are typically a lot higher than your med copay in a PPO. The prices are also typically higher than GoodRx. So then you have to make estimates/decisions - if you go the HDHP route-you can buy the meds using GoodRx cheaper but those will not count towards your insurance deductible, or you can pay the higher insurance drug prices that will go against the deductible. If you would have hit the deductible anyway, or come close, then better to pay the higher prices until deductible is hit. If you don’t have much medical expenses, GoodRx will be better.

Of course, with the nature of medical expenses, they are often unpredictable.

[DeliberateDonkey]

You can have a Low Deductible Health Care Plan (LDHP) that is PPO and High Deductible Health Care Plan (HDHP) that is PPO. PPO and HDHP are not mutually exclusive.

Are you sure about that? HDHP plans aren't defined strictly by their deductibles. To my understanding, they are not allowed to provide any benefits (other than preventable and remote care services) until their deductible is met. PPO plans are defined largely by their fixed copayments, which HSA-eligible HDHP plans cannot offer for the vast majority of services.

OP should probably go ahead and pull their EOB documents from the past year to get a better idea of what those visits will cost them under the HDHP. I agree that it's almost certainly the better option, but hard to say without all the details.

Yep, pretty confident. PPO stands for Preferred Provider Organization and has more to do with what providers are considered in-network and usually has more options when compared to Health Maintenance Organization (HMO) in-network providers. HDHP's can be HMO or PPO. Non-HDHP's, or LDHP's can can be HMO or PPO too.

The OP isn't making an uncommon mistake. In my experience the vast majority of people I've overheard or directly been in conversations with regarding open enrollment choices say "HDHP vs PPO" when they are likely comparing LDHP PPO vs HDHP PPO. In fact, I bet a search of HDHP vs PPO on this very site shows a ton of hits with that exact comparison. Maybe more people say HSA vs PPO though, which is the same issue in my opinion.

Not to belabor the point, but in this context, OP is using the term "PPO" to refer to a traditional PPO medical plan with fixed copays. I simply intended to clarify for the record that there is no such thing as an HDHP with fixed copays for most services. That point is lost when using the terms "LDHP PPO" and "HDHP PPO," leading people to believe that the size of the deductible is the core difference.

[marcopolo]

One wild card in comparing HDHP vs PPO plans is prescriptions. In an HDHP plan you are going to be charged the full insurance negotiated rates for the meds until you hit the deductible. These prices are typically a lot higher than your med copay in a PPO. The prices are also typically higher than GoodRx. So then you have to make estimates/decisions - if you go the HDHP route-you can buy the meds using GoodRx cheaper but those will not count towards your insurance deductible, or you can pay the higher insurance drug prices that will go against the deductible. If you would have hit the deductible anyway, or come close, then better to pay the higher prices until deductible is hit. If you don’t have much medical expenses, GoodRx will be better.

Of course, with the nature of medical expenses, they are often unpredictable.

Again, this has nothing to do with a PPO. A PPO can be a HDHP with the same issues you accurately point out.

[AnEngineer]

You can have a Low Deductible Health Care Plan (LDHP) that is PPO and High Deductible Health Care Plan (HDHP) that is PPO. PPO and HDHP are not mutually exclusive.

Are you sure about that? HDHP plans aren't defined strictly by their deductibles. To my understanding, they are not allowed to provide any benefits (other than preventable and remote care services) until their deductible is met. PPO plans are defined largely by their fixed copayments, which HSA-eligible HDHP plans cannot offer for the vast majority of services.

OP should probably go ahead and pull their EOB documents from the past year to get a better idea of what those visits will cost them under the HDHP. I agree that it's almost certainly the better option, but hard to say without all the details.

Yep, pretty confident. PPO stands for Preferred Provider Organization and has more to do with what providers are considered in-network and usually has more options when compared to Health Maintenance Organization (HMO) in-network providers. HDHP's can be HMO or PPO. Non-HDHP's, or LDHP's can can be HMO or PPO too.

The OP isn't making an uncommon mistake. In my experience the vast majority of people I've overheard or directly been in conversations with regarding open enrollment choices say "HDHP vs PPO" when they are likely comparing LDHP PPO vs HDHP PPO. In fact, I bet a search of HDHP vs PPO on this very site shows a ton of hits with that exact comparison. Maybe more people say HSA vs PPO though, which is the same issue in my opinion.

Not to belabor the point, but in this context, OP is using the term "PPO" to refer to a traditional PPO medical plan with fixed copays. I simply intended to clarify for the record that there is no such thing as an HDHP with fixed copays for most services. That point is lost when using the terms "LDHP PPO" and "HDHP PPO," leading people to believe that the size of the deductible is the core difference.

While HSA compliant plans are required to have no first dollar coverage except for preventative care (that is, you pay the full negotiated rate until you hit the deductible) they are also required to have deductibles of a certain size (that is, large). What the "core" difference is is a matter of perspective and depends on what you're comparing to.

[AnEngineer]

...
This works out best for those who are healthy and thus don’t have big medical bills. Since the insurance company won’t pay a bill of theirs until they met the deductible, both parties come out ahead and the money just continues to grow in the HSA each year. But if their medical expenses are more than the deductible and they plan to pay it off from the HSA, they would have been better off getting an insurance plan with a low deductible, since they are just contributing to the HSA and then pulling it out the same year.
...

(emphasis added)

It really depends on the plan. Most times I've seen HSA and non HSA plans offered to the same person, the HSA plan is better for both no expenses and very high expenses.

[OrangeKiwi]

I just assume the triple tax advantage of HSA is always better than anything else if I have the cash to afford out of pocket maximums for at least 2 years (in case something happens at end of calendar year and healthcare purchases carry over into next calendar year). If I understand correctly, the actuarial value of the metal levels are legislated such that you either pay higher premiums regularly, or you pay higher at the time of the healthcare event via higher deductible/oop max.

https://www.healthcare.gov/choose-a-pla ... ategories/

So unless you know you will use up a ton of healthcare on a regular basis, you might as well take the guarantee of tax free income and investment earnings via HSA and pay lower premiums.

Pdf the receipts, keep track of expenses in spreadsheet, and then withdraw in 20 to 60 years as needed.

Although, I have always wondered how it is even possible for HSA withdrawals for medical expenses in 60 years to be audit-able. Surely, the IRS is not already collecting everyone’s medical expenses by SSN, and healthcare providers will either not exist or will not have corresponding records in 60 years to check the validity of the receipts.

[csmath]

...
This works out best for those who are healthy and thus don’t have big medical bills. Since the insurance company won’t pay a bill of theirs until they met the deductible, both parties come out ahead and the money just continues to grow in the HSA each year. But if their medical expenses are more than the deductible and they plan to pay it off from the HSA, they would have been better off getting an insurance plan with a low deductible, since they are just contributing to the HSA and then pulling it out the same year.
...

(emphasis added)

It really depends on the plan. Most times I've seen HSA and non HSA plans offered to the same person, the HSA plan is better for both no expenses and very high expenses.

I agree with AnEngineer. I have found that the commonly repeated, "HDHP's are only good for healthy people" is often very, very wrong. This was one of the strengths of the spreadsheet I linked above. Here it is again: viewtopic.php?t=295181. It allowed me to play around with many different variables and showed visually exactly how and when various plans are better or worse depending on the expenses. What I found is that for every single HDHP plan that someone posted here with questions resulted in a "band" where the LDHP was better. Sometimes the LDHP benefit completed faded away if you were maxing your HSA contributions. I also found that while the HDHP plans are vastly superior with no medical expenses, that the HDHP often regains superiority again at higher medical expense levels.

Below is a personal example of a real plan. The horizontal axis is how much money is personally being contributed to my HSA and/or 401k, 403b, etc. The vertical axis shows various levels of medical expenses. The highlighted column demonstrates the results for my 2023 plan options if I max my contributions to the HSA. Notice that the HDHP is superior for all levels of medical expenses except for a band ranging from $6,000 - $9,000? In all other cases, at my HSA funding level, the HDHP wins. Another important thing to notice is the magnitude of the advantage of the HDHP. One good year (low medical expenses) overcomes many years of having the worst possible outcome for the HDHP. Clearly for me, the HDHP is a no brainer. Also note, that the LDHP is more competitive if I do not take advantage of the tax benefits and contribute $0 beyond my employer's contribution.

[csmath]

Also note, that the LDHP is more competitive if I do not take advantage of the tax benefits and contribute $0 beyond my employer's contribution.

Come to think of it, considering the average person's retirement savings plans, no wonder most people say that HSA's are only good for healthy people. I'd guess that the majority of people with access to HDHP + HSA would fall in the first column and not be taking advantage of the tax savings available to them.

[tashnewbie]

Also note, that the LDHP is more competitive if I do not take advantage of the tax benefits and contribute $0 beyond my employer's contribution.

Come to think of it, considering the average person's retirement savings plans, no wonder most people say that HSA's are only good for healthy people. I'd guess that the majority of people with access to HDHP + HSA would fall in the first column and not be taking advantage of the tax savings available to them.

Very helpful spreadsheet you linked above. I think for a lot of people, with a non-HSA eligible plan, they don't notice the higher premiums that come out of their paychecks and the copays, which are more salient in their minds, are much cheaper than paying the full negotiated rate with an HSA-eligible plan. So overall, it feels like the non-HSA eligible plan is cheaper. I think for a lot of people a non-HSA eligible plan smooths the cost of medical expenses throughout the year which can be easier for them to manage.

[tibbitts]

I travel around the states a lot. When I had an HMO it meant that anytime I needed health care that I had to use an emergency department. No Bueno.
With a PPO I can select doctors based on their acceptance of my medical plan - which most do.
So . . . for me, a PPO make more sense.
However, an HMO might be a better choice financially if I were a home body.

Some PPOs don't have in-network providers outside of a region or state. When I had a BCBS PPO a couple of decades ago indeed what you describe was the case, but I'm not sure that's the case now with many plans.

[Jags4186]

The on variable that is impossible to know is whether or not the two plans offer the same negotiated rates.

With a HDHP plan when you're still in your deductible coinsurance phase, this can be a huge variable in deciding what your costs are.

Example:

HDHP
You go to the doctor and they bill insurance $500. The negotiated rate is $390. You pay $390.

vs.

You go to the doctor and they bill insurance $500. The negotiated rate is $200. You pay $200.

LDHP
You go to the doctor and they bill insurance $500. The negotiated rate is irrelevant you're paying $25 copay.

[AnEngineer]

Also note, that the LDHP is more competitive if I do not take advantage of the tax benefits and contribute $0 beyond my employer's contribution.

Come to think of it, considering the average person's retirement savings plans, no wonder most people say that HSA's are only good for healthy people. I'd guess that the majority of people with access to HDHP + HSA would fall in the first column and not be taking advantage of the tax savings available to them.

Very helpful spreadsheet you linked above. I think for a lot of people, with a non-HSA eligible plan, they don't notice the higher premiums that come out of their paychecks and the copays, which are more salient in their minds, are much cheaper than paying the full negotiated rate with an HSA-eligible plan. So overall, it feels like the non-HSA eligible plan is cheaper. I think for a lot of people a non-HSA eligible plan smooths the cost of medical expenses throughout the year which can be easier for them to manage.

Maybe there's that perception, but those people are often better off and can get the same effect by contributing the premium savings into an HSA via payroll deduction.

[mw1739]

For myself, the decision is more than financial. If I know I can go to the doctor/urgent care/ER for a fixed cost, I'm more likely to do so than pay out of pocket. The inner Boglehead in me loves saving money and I would likely cringe at the cost everytime I need to go to the doctor or get a prescription. Yes, I pay a little extra for my PPO (w/ FSA) than I would for a HDHP (w/HSA), but I think I'm healthier for it. Definitely willing to pay for that luxury.

[WestCoastPhan]

...
This works out best for those who are healthy and thus don’t have big medical bills. Since the insurance company won’t pay a bill of theirs until they met the deductible, both parties come out ahead and the money just continues to grow in the HSA each year. But if their medical expenses are more than the deductible and they plan to pay it off from the HSA, they would have been better off getting an insurance plan with a low deductible, since they are just contributing to the HSA and then pulling it out the same year.
...

(emphasis added)

It really depends on the plan. Most times I've seen HSA and non HSA plans offered to the same person, the HSA plan is better for both no expenses and very high expenses.

I agree with AnEngineer. I have found that the commonly repeated, "HDHP's are only good for healthy people" is often very, very wrong. This was one of the strengths of the spreadsheet I linked above. Here it is again: viewtopic.php?t=295181. It allowed me to play around with many different variables and showed visually exactly how and when various plans are better or worse depending on the expenses. What I found is that for every single HDHP plan that someone posted here with questions resulted in a "band" where the LDHP was better. Sometimes the LDHP benefit completed faded away if you were maxing your HSA contributions. I also found that while the HDHP plans are vastly superior with no medical expenses, that the HDHP often regains superiority again at higher medical expense levels.

Below is a personal example of a real plan. The horizontal axis is how much money is personally being contributed to my HSA and/or 401k, 403b, etc. The vertical axis shows various levels of medical expenses. The highlighted column demonstrates the results for my 2023 plan options if I max my contributions to the HSA. Notice that the HDHP is superior for all levels of medical expenses except for a band ranging from $6,000 - $9,000? In all other cases, at my HSA funding level, the HDHP wins. Another important thing to notice is the magnitude of the advantage of the HDHP. One good year (low medical expenses) overcomes many years of having the worst possible outcome for the HDHP. Clearly for me, the HDHP is a no brainer. Also note, that the LDHP is more competitive if I do not take advantage of the tax benefits and contribute $0 beyond my employer's contribution.

It's a useful tool. That said, people should be aware that if you have a lot of out-of-network expenses, the tool in certain circumstances vastly understates the costs of a HDHP. The tool uses the out-of-pocket maximum as a true cap, but they are not. For example, you go to see an out-of-network specialist. The specialist charges you $500; the PPO says that the "customary" charge for the service is $300 -- in that case only your co-pay portion of the $300 counts against your out-of-pocket maximum. But your wallet is actually out $500. And once you reach your OOPM, you're still only getting reimbursed for the customary charge (in the example, $300). If you use a lot of out-of-network specialists, the amount of dollars that actually leave your pocket can be significantly higher than the stated "out-of-pocket" maximum.

[AnEngineer]

It's a useful tool. That said, people should be aware that if you have a lot of out-of-network expenses, the tool in certain circumstances vastly understates the costs of a HDHP. The tool uses the out-of-pocket maximum as a true cap, but they are not. For example, you go to see an out-of-network specialist. The specialist charges you $500; the PPO says that the "customary" charge for the service is $300 -- in that case only your co-pay portion of the $300 counts against your out-of-pocket maximum. But your wallet is actually out $500. And once you reach your OOPM, you're still only getting reimbursed for the customary charge (in the example, $300). If you use a lot of out-of-network specialists, the amount of dollars that actually leave your pocket can be significantly higher than the stated "out-of-pocket" maximum.

But that's equally true of non HDHP plans. Are you claiming there's a higher impact on HDHPs? Why?

[AnEngineer]

For myself, the decision is more than financial. If I know I can go to the doctor/urgent care/ER for a fixed cost, I'm more likely to do so than pay out of pocket. The inner Boglehead in me loves saving money and I would likely cringe at the cost everytime I need to go to the doctor or get a prescription. Yes, I pay a little extra for my PPO (w/ FSA) than I would for a HDHP (w/HSA), but I think I'm healthier for it. Definitely willing to pay for that luxury.

That can be a real effect, but why can't you just pretend that you have no incremental cost? The starting difference is often several thousand dollars between premiums and employer HSA contributions. That pays for a lot of full price visits.

[WestCoastPhan]

It's a useful tool. That said, people should be aware that if you have a lot of out-of-network expenses, the tool in certain circumstances vastly understates the costs of a HDHP. The tool uses the out-of-pocket maximum as a true cap, but they are not. For example, you go to see an out-of-network specialist. The specialist charges you $500; the PPO says that the "customary" charge for the service is $300 -- in that case only your co-pay portion of the $300 counts against your out-of-pocket maximum. But your wallet is actually out $500. And once you reach your OOPM, you're still only getting reimbursed for the customary charge (in the example, $300). If you use a lot of out-of-network specialists, the amount of dollars that actually leave your pocket can be significantly higher than the stated "out-of-pocket" maximum.

But that's equally true of non HDHP plans. Are you claiming there's a higher impact on HDHPs? Why?

I suppose you are correct.

[AnEngineer]

It's a useful tool. That said, people should be aware that if you have a lot of out-of-network expenses, the tool in certain circumstances vastly understates the costs of a HDHP. The tool uses the out-of-pocket maximum as a true cap, but they are not. For example, you go to see an out-of-network specialist. The specialist charges you $500; the PPO says that the "customary" charge for the service is $300 -- in that case only your co-pay portion of the $300 counts against your out-of-pocket maximum. But your wallet is actually out $500. And once you reach your OOPM, you're still only getting reimbursed for the customary charge (in the example, $300). If you use a lot of out-of-network specialists, the amount of dollars that actually leave your pocket can be significantly higher than the stated "out-of-pocket" maximum.

But that's equally true of non HDHP plans. Are you claiming there's a higher impact on HDHPs? Why?

I suppose you are correct.

Then I suggest you amend your similar post in the other thread.

[MrTom]

I usually start by looking at the difference in premiums
PPO - 6000
HDHP/HSA - 2400

Then I look at what happens in an absolutely catastrophic year, taking into consideration the employer HSA contribution

In that scenario,
your costs for the PPO are: 6000 +$8000 = $14,000
your costs for the HSA are: 2400 + 10,000 - 2000 = $10,400

So the HSA is winning on both counts so far.

Then I think about a hopefully more normal year, and try to figure out how much the company contribution might offset those costs.

In my area, I know based on experience that my PCP will cost em about $100 per visit before hitting the deductible. I budget about the same for lab work. Specialists would be the biggest wild card because it depends on what kind of specialists you need, but for me I assume 150-200 based on my prior specialist billing. So if I used my numbers with your expected visits,
6*$100 + 4*$200 + 4*$100 + $600 = $2,400 - $2,000 employer contribution = $400 out of pocket for the year.

So, $400 out of pocket vs 3600 extra in premiums on the PPO, without even bothering to add in the copay costs on the PPO would make the HSA the winner again.

Again, costs for visits can vary wildly throughout the country, so you need to adjust as needed. One way to do this is to look at your EOB you've received under your current plan, and you should see an "Allowed by plan" amount. This is a reasonable estimate of what you'll now have to pay yourself out of pocket until you hit your high deductible amount.

And then you can also try and factor in the tax benefits, but thats just gravy.

[miket29]

Not to belabor the point, but in this context, OP is using the term "PPO" to refer to a traditional PPO medical plan with fixed copays. I simply intended to clarify for the record that there is no such thing as an HDHP with fixed copays for most services. That point is lost when using the terms "LDHP PPO" and "HDHP PPO," leading people to believe that the size of the deductible is the core difference.

When I worked at MegaCorp we had a HDHP with a deductible and an out-of-pocket max. Until you hit the deductible you were on the hook for 100% of the costs. After that there were copays of 20% until the out-of-pocket max was hit. So in some sense there were fixed copays once the deductible was exceeded.

[N.Y.Cab]

Have not consider PPO or HMO for years. There's a good chance of saving some serious money with CDHP+HSA with lower premium, tax deduction plus contributions from employer and employee.

[JBTX]

One wild card in comparing HDHP vs PPO plans is prescriptions. In an HDHP plan you are going to be charged the full insurance negotiated rates for the meds until you hit the deductible. These prices are typically a lot higher than your med copay in a PPO. The prices are also typically higher than GoodRx. So then you have to make estimates/decisions - if you go the HDHP route-you can buy the meds using GoodRx cheaper but those will not count towards your insurance deductible, or you can pay the higher insurance drug prices that will go against the deductible. If you would have hit the deductible anyway, or come close, then better to pay the higher prices until deductible is hit. If you don’t have much medical expenses, GoodRx will be better.

Of course, with the nature of medical expenses, they are often unpredictable.

Again, this has nothing to do with a PPO. A PPO can be a HDHP with the same issues you accurately point out.

Ok. I didn’t know this, and what you said is technically true.

https://www.aetna.com/health-guide/hmo- ... rence.html

An HDHP can be an HMO, POS, PPO or EPO.

But realistically when you have a choice between a straight up PPO plan and an HDHP plan, the PPO is typically not an HDHP, otherwise it will be referred to as HDHP. PPO vs HDHP is pretty common terminology used when comparing the two.

Elsewhere you or somebody else referred to a “LDHP”, I have never heard of that terminology. “HDHP” is a specific type of plans that has to adhere to certain rules, only one of them being higher deductibles. I have been on PPO plans that have higher deductibles than some HDHPs, but they don’t qualify as HDHP because of certain attributes - perhaps co pays on prescriptions, whereas HDHP plans have to apply scripts the same way as medical care, at full cost until the deductible is reached.

[marcopolo]

One wild card in comparing HDHP vs PPO plans is prescriptions. In an HDHP plan you are going to be charged the full insurance negotiated rates for the meds until you hit the deductible. These prices are typically a lot higher than your med copay in a PPO. The prices are also typically higher than GoodRx. So then you have to make estimates/decisions - if you go the HDHP route-you can buy the meds using GoodRx cheaper but those will not count towards your insurance deductible, or you can pay the higher insurance drug prices that will go against the deductible. If you would have hit the deductible anyway, or come close, then better to pay the higher prices until deductible is hit. If you don’t have much medical expenses, GoodRx will be better.

Of course, with the nature of medical expenses, they are often unpredictable.

Again, this has nothing to do with a PPO. A PPO can be a HDHP with the same issues you accurately point out.

Ok. I didn’t know this, and what you said is technically true.

https://www.aetna.com/health-guide/hmo- ... rence.html

An HDHP can be an HMO, POS, PPO or EPO.

But realistically when you have a choice between a straight up PPO plan and an HDHP plan, the PPO is typically not an HDHP, otherwise it will be referred to as HDHP. PPO vs HDHP is pretty common terminology used when comparing the two.

Elsewhere you or somebody else referred to a “LDHP”, I have never heard of that terminology. “HDHP” is a specific type of plans that has to adhere to certain rules, only one of them being higher deductibles. I have been on PPO plans that have higher deductibles than some HDHPs, but they don’t qualify as HDHP because of certain attributes - perhaps co pays on prescriptions, whereas HDHP plans have to apply scripts the same way as medical care, at full cost until the deductible is reached.

I don't think I have ever used the term LDHP. I agree that HDHP has a specific definition.

The fact that a PPO plan can also be a HDHP is not just theoretical or technical. It is real. We have one.

Our choices on our state exchange were:

A HMO plan that was a HDHP
A HMO that is not HDHP
A PPO that is HDHP
A PPO that is not HDHP.

We chose the PPO that is also a HDHP so we could contribute to a HSA.

Choosing between a PPO and a HDHP has no meaning in this context.

PPO and HSA are two independent things. Asking if you should get a PPO or a HDHP is like asking if you should buy a blue car or a Mercedes. They both describes different attributes, but are independent of each other.

In the common scenario you describe, the PPO is probably not a HDHP as you say, but the HDHP plan is often a PPO. So, saying you are choosing between a PPO and a HDHP is kind of odd when both plans are in fact PPOs.

[grabiner]

I usually start by looking at the difference in premiums
PPO - 6000
HDHP/HSA - 2400

Then I look at what happens in an absolutely catastrophic year, taking into consideration the employer HSA contribution

In that scenario,
your costs for the PPO are: 6000 +$8000 = $14,000
your costs for the HSA are: 2400 + 10,000 - 2000 = $10,400

So the HSA is winning on both counts so far.

Then I think about a hopefully more normal year, and try to figure out how much the company contribution might offset those costs.

And this understates the benefit, because of the tax savings on your own contribution to the HSA. If you contribute $5000 of your own money to the HSA, you get $1100 additional benefit in a 22% tax bracket (versus, say, contributing $3900 out of pocket to a Roth IRA, which would also grow tax-free).

The worst case is usually when you hit the HSA deductible exactly, but that is not the case for the OP's plan, because the conventional plan has lower co-payments than the HDHP even after the deductible.

The big issue is 10% co-pay versus 20% for inpatient hospital bills, or $200 versus 20% for outpatient. If you have a $25K inpatient hospital bill, that is $3000 for the HDHP deductible, and then $4400 co-pay, for a cost of $7400. It is $1000 for the conventional deductible, and then $2400 co-pay, for a cost of $2500. So in this situation, the HDHP advantage is $4900 less than the day-one cost.

But the day-one cost difference is more than $4900. The PPO costs $3600 more, which is $2808 more after tax if you use payroll deduction in a 22% tax bracket. The HDHP contributes $2000 to the HSA, and $1100 tax savings on your own contribution to the HSA, for net advantage of $5908. Thus, even in this situation, which is close to the worst case, the HDHP comes out ahead.

[FIRWYW]

To CSmath’s comment on the HSA being better for some people if even if high expense, that is true for ours. We have 3 plan options at our work. The HSA out of pocket maximum for families is less than the other two plans premiums. That is before the companies HSA contribution. Hence in a really bad year, with the HSA you save about $1400. Anything year with less cost is bonus

[LadyGeek]

Wellfleet has a question which I've moved into a new thread. See: [Point of Service (POS) or HDHP + HSA]

(Thanks to the member who reported the post and explained what's wrong.)

[LadyGeek]

glacierbob has a question which I've moved into a new thread. See: Help me decide - PPO and Flexible Spending Arrangement vs. HDHP and Health Savings Account

(This is a 2022 thread focused on quizzer25's personal situation.)