Health insurance terminology is annoyingly complex. It makes choosing the right plan, even harder. We will review two of the most common health insurance options, an HDHP and a PPO to show you their similarities and differences.
We will also see if an HDHP can be classified as a PPO.
What is an HDHP (high deductible health plan)?
A High Deductible Health Plan (HDHP) is a healthcare plan traditionally defined by lower premiums and higher deductibles.
2019 HDHP Requirements
- Annual minimum deductible of $1,350 for individuals and $2,700 for families
- Annual out-of-pocket maximum can’t be more than $6,750 for individuals and $13,500 for families
- The health insurance plan must be so that the individual pays the first cost of health care up to the deductible before any kind of insurance kicks in (preventative care excluded from this definition).
What is a PPO (Preferred Provider Organization)?
Preferred Provider Organizations (PPOs) offer a wide range of choice in terms of care providers. You have the freedom to choose the doctor and hospital because even if they aren’t in your network, your insurance will still cover a portion of the medical care.
You also don’t need approval from your primary care provider in order to see a specialist or have a test or procedure done. You can manage your care in the manner that suits you.
PPO plans offer the most coverage and therefore tend to be more expensive in terms of premiums.
Can an HDHP be a PPO?
This is where things can get confusing. Here’s why:
- Most articles you read will talk about PPOs and HDHP as two sperate classifications of health plans. They are compared as equals. They are not. Comparing HDHPs and PPOs are like comparing apples and oranges.
Here is what you need to know. Read this twice:
- As long as a PPO adheres to the HDHP requirements outlined above, it could be considered an HSA-eligible HDHP.
- HDHPs can also be part of PPO networks, therefore they can be PPOs.
Do you see why this can be so confusing?
What you will often read about are the cost differences between a PPO and HDHP. However, in recent years the differences in the cost and coverage difference between PPOs and HDHPs have narrowed. This has been influenced by rising health costs.
What should you take away from this article? Healthcare plans are all about the fine print. They are constantly changing. What was true last year, might not be true this year. Be vigilant about your health plan comparison. Incorporate this into your open enrollment strategy. Next year, you will be a healthcare expert.
Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.