HDHP vs. PPO Health Insurance

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If you’ve decided that when it comes to your healthcare, choice in doctor and hospital is important, then you’ve probably also decided against an HMO. 

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If you’ve decided that when it comes to your healthcare, choice in doctor and hospital is important, then you’ve probably also decided against an HMO.  Congratulations!  You’ve narrowed your possible plans down by one category.  Now to decipher the others.

In this article, we’re going to tackle the difference between the High Deductible Health Plan (HDHP) and the Preferred Provider Organization (PPO).  Surprise!  There’s actually no difference between HDHP and PPO insurance in terms of the type of care or provider network because an HDHP can be a PPO, an HMO, a POS (aka point-of-service), or EPO.

The difference between PPOs, HMOs, POSs, and EPOs lies in the flexibility of their networks, whereas an HDHP is determined by the amount of the deductible.  The deductible is the amount of money you have to pay out of pocket before the insurance carrier starts covering your medical expenses.

PPO Plans

Preferred Provider Organizations (PPOs) were created to lower the cost of medical care while also offering a wide range of choice in terms of care providers.  If you choose a PPO, you’ll have the freedom to choose the doctor and hospital that works for you, because even if they aren’t in your network, your insurance will still cover a portion of the medical care.

Another great benefit of the PPO plan is the fact that you don’t need approval from your primary care provider in order to see a specialist or have a test or procedure done.  So you can manage your care in the manner that suits you.

The drawback of PPO plans is that they tend to be more expensive in terms of premiums, but for that higher price, you’ll get a greater percentage of your care covered than you would with an HDHP.

HDHP Plans

High Deductible Health Plans (HDHPs) are plans that can have any kind of network: HMO, PPO, POS or EPO, but the deductible and out-of-pocket costs are usually the highest you’ll find on the market.

The positive is that they’re also likely to have the cheapest premiums (i.e. monthly payments) you’ll find and you’ll have the option to open a Health Savings Account (HSA) along with your HDHP.  An HSA is a pretax savings account you can use for any approved medical expenses which include premiums, deductibles and other out-of-pocket expenses.  You also can’t lose this money year-to-year so if you’re able to save most of it, you could wind up with a nice nest egg for expensive procedures you might need down the road.

The deductible for an HDHP will be between $1,350 for an individual, $2,700 for a family, and $6,650 for an individual, $13,300 for a family.  Preventative care is free even if you haven’t met your deductible and you won’t ever be charged a copay.  The maximum HSA contribution for 2019 is $3,500 for an individual and $7,000 for a family.

Which Plan is Best?

The choice between a traditional PPO and HDHP will largely depend on your expected healthcare needs.  If you anticipate life events that will require more care like the birth of a child or a necessary surgery, it might actually be cheaper for you to pay a higher monthly premium for PPO coverage than for you to go with an HDHP.

But if you only anticipate needing preventative services for the foreseeable future and have the wiggle room in your budget to contribute to an HSA, those savings could help you out if you need an expensive procedure down the road.

Whichever plan you choose, the most important things to consider are your current and foreseeable medical needs.  You want to make sure those are covered.  If not, you could end up paying way more out of pocket for the “cheapest” plan on the market.

If you need more help with health account decisions, check out our blog. We will make you a healthcare benefits expert in no time, without any extra work or effort on your end.

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.