Why do companies make this decision so difficult? We want to clear the air and make this an easy choice. We’ll detail two of the most commonly utilized health insurance plans: High-Deductible Health Plans (HDHPs) and Preferred Provider Organizations (PPOs). Keep reading to compare HDHP vs PPO plans and how each can benefit you and your family.
Every year when open enrollment rolls around, employees are usually faced with a bevy of choices. One of the most critical decisions employees make during open enrollment is which type of health insurance plan you select. Unfortunately, health insurance can be confusing. Plus, picking which plan is right for you depends almost entirely on you and your family’s situation.
High-Deductible Health Plans (HDHPs)
A High-Deductible Health Plan is a type of health insurance plan that, as its name implies, has a higher deductible than traditional insurance plans such as an HMO, EPO, or PPO. For 2020, the IRS defines an HDHP as any plan with a deductible of at least $1,400 for individuals and $2,800 for a family.
So, participants will pay for more of their healthcare costs before the insurance company starts to pay its share (your deductible). The flipside for those in an HDHP is these plans typically have significantly lower monthly premiums.
Additionally, HDHPs, like other health plans do carry a maximum out-of-pocket limit a participant can’t go over. For 2020, total yearly out-of-pocket expenses can’t exceed more than $6,900 for individuals and $13,800 for a family. Note, these out-of-pocket limits don’t apply to out-of-network services.
Participants in HDHPs must select a provider from the network but can pick whichever provider they choose in said network. Giving participants their choice of provider (within the network) encourages you to compare prices for health, dental, vision, and prescriptions.
It’s also important to note that HDHPs can provide preventative care benefits without them counting toward your deductible. Or, they can provide these services below the minimum annual deductible. Preventive care includes, but isn’t limited to: periodic health evaluations, routine prenatal care, immunizations, tobacco cessation, obesity weight-loss programs, and screening services.
The Key to Maximizing Your HDHP
The key to maximizing the effectiveness of your HDHP is utilizing a health savings account (HSA). An HSA is an individual bank account that helps participants save and pay for covered healthcare and qualified medical expenses. To enroll in an HSA, you must be enrolled in an HSA-eligible, high-deductible health plan.
For 2020 the maximum contributions for HSAs are $3,550 for individuals and $7,100 for families, respectively. The catch-up contribution limit for those over age 55 is $1,000. One of the most significant advantages of participating in an HSA is the tax benefits these accounts offer.
HSAs provide three distinct tax benefits that help participants save:
1. Contributions are tax-deductible. You contribute pre-tax dollars to an HSA, which reduces your taxable income for the year.
2. Earnings grow tax-free. You can invest your HSA contributions, and the interest accrues tax-free.
3. You can withdraw money tax-free. You can make withdrawals from your HAS tax-free, as long as the money is used for qualified medical expenses. Find a list of these expenses from the IRS here.
It’s also essential to know that the money you contribute to an HSA is always yours, and unlike Flexible Spending Accounts (FSAs), it doesn’t expire. So, if you don’t use the money you contributed during the course of a year, you can keep rolling it over into the next. You can also roll your HSA contributions over to a different HSA if you get a new job. Similarly, you can also pass on an HSA to a beneficiary.
Preferred Provider Organizations (PPOs)
A Preferred Provider Organization is a type of health insurance plan that offers a network of healthcare providers. Under a PPO, plans give participants the freedom to seek care from any in- or out-of-network provider. Still, you will have to pay more out-of-pocket medical costs if you want to see an out-of-network provider.
Even if your nonmember doctor accepts the PPO rate, your plan may make you pay an extra amount because the doctor isn’t a member of the plan. Similarly, under a PPO, participants don’t need a referral to receive care from a specialist or a hospital.
The biggest advantage PPO plans offer over HDHPs is lower deductibles. That means a participant in an HDHP will have to spend more, than someone in a PPO, to reach the point where the insurance company will help pay for medical costs.
HDHP vs PPO
|Do I need a Primary Care Physician?||No, an HDHP doesn’t require a PCP. You can select any doctor you choose, but you will pay more for out-of-network care. Though, you may receive more coverage for an in-network provider.||No, a PPO doesn’t require a PCP. You can select any doctor you choose, but you will pay more for out-of-network care.|
|Do I need a referral to see a Specialist?||No, if you want to see a specialist or go to a hospital, you make the appointment yourself. But you will pay more for out-of-network care.||No, if you want to see a specialist or go to a hospital, you make the appointment yourself.|
|Will any care any care I receive from an out-of-network provider be covered?||Yes, HDHPs allow you to see any medical provider, including those who are out-of-network. As previously stated, you will have to pay higher out-of-pocket costs for out-of-network treatment.||Yes, PPOs allow you to see any medical provider, including those who are out-of-network. As previously said, you will have to pay higher out-of-pockets costs.|
|Will I have to file a claim?||Yes, if you receive out-of-network care, you’ll have to submit your claims to be reimbursed.||Yes, if you receive out-of-network care, you’ll have to submit your claims to be reimbursed.|
|How much will these plans costs?||Lower costs on premiums, higher costs on deductibles and out-of-pocket expenses.||Higher costs on premiums, lower costs on deductibles and out-of-pocket expenses.|
Making a Decision?
Now you’ve read about both options. But which plan is right for you and your family? When you’re choosing between an HDHP vs PPO, there is a multitude of factors you must consider. If you, or your dependents, utilize a lot of specialists or require regular hospitalization, a PPO may be better for you.
HDHPs will typically have lower monthly premiums, but higher out-of-pocket costs, in general. So, if you’re younger, healthy, and have money to deposit into an HSA, an HDHP may be right for you. But, if you have a chronic condition or large family, the out-of-pocket costs under an HDHP may be too high for you.
So, which health insurance plan is right for you, and your family? Well, as with most choices in life, it depends. Before choosing between an HDHP vs PPO plan, make sure you consult with your family and benefits advisor before deciding which plan is best for your family and yourself.
And if you need extra help choosing which plan is right for you, contact The Olson Group today!