A CDHP is a Consumer Directed Health Plan. CDHPs use a high deductible, paired with a tax-advantages health spending account, or HAS, to increase the amount of accountability that is in place for personalized health care spending.
CDHPs include flexible spending arrangements, health reimbursement arrangements, and medical savings accounts. Each offers a potential set of tax benefits for the consumer to consider when taking care of their healthcare needs.
A PPO is a Preferred Provider Organization. It is similar to an HMO, or Health Maintenance Organization, in that it offers patients access to a network of healthcare providers. You can choose any provider within that network, as each one has agreed to provide care to plan members at a specific rate.
You can also choose to receive care outside of your network with a PPO and still have agreed-upon rates.
The primary difference between a CDHP vs a PPO is that one is a form of health insurance that is largely self-directed, while the other is a form of healthcare that requires you to pay less out of pocket, but more into monthly premium payments.
What Are the Benefits of a CDHP?
With a CDHP, the out-of-pocket costs for a patient are going to be much lower than they would be with a PPO. For many, the cost of premiums is similar to that of an HMO, with some patients qualifying for rates that are even lower than you can find with a narrow list of providers.
You also have the same flexibility with a CDHP that you would have with a PPO. You’re not limited in the choice of doctors or providers like you would be with an HMO. The only difference between the two here is that you’ll pay more in up-front costs with the CDHP because your deductibles are going to be higher on this plan.
A CDHP helps you to avoid the market rate for healthcare services when you seek out care as well. Even though the insurance may require a higher deductible and higher copays, you’ll still get to pay the negotiated rate between the provider and the insurance company administering your plan. That will help you to save between 15% to 40% on certain services provided.
Then, when you save money in your health savings account, those funds never expire. You continue to have access to them whenever a qualifying expense occurs. Withdrawals are possible for non-qualifying expenses as well, though this action incurs a tax penalty and may have other financial charges to consider.
What Are the Disadvantages of a CDHP?
The CDHP is designed for people who generally don’t require much care from a doctor over the course of a year. Because the deductibles are so high with this plan, many households could struggle to reach a point where supplemental benefits are provided. Many of these plans have a deductible that is higher than $10,000.
For families, the deductibles can be as high as $15,000.
To make a CDHP feasible, most households need to start a Health Savings Account of some type. If this type of insurance is offered by an employer, there might be a funding match provided to the HSA. You must save money every month into your tax-advantaged plan to ensure you’ll be able to pay for care when it is needed.
Some medical providers might require patients who have a CDHP to pay for all services in full up-front. In this situation, you may need to schedule time to speak with a financial counselor or advisor to begin a payment plan arrangement. Not every medical provider may be willing to offer a payment plan, which means your network is effectively limited because of how you choose to pay.
Because a CDHP is an HSA-eligible plan, you cannot be covered by another non-HSA eligible plan. You cannot be enrolled in Medicare either if you have a CDHP. Rules prevent you from being claimed as a dependent as well, and you are not permitted to have an FSA with this type of care.
What Are the Benefits of a PPO?
Unlike an HMO, you will receive more freedom to receive care when you have a PPO. You can receive care from any provider with this type of insurance. It allows you to visit any specialist, any doctor, and use any hospital.
With a PPO, you are not required to choose a primary care physician, or PCP, as part of your coverage. That means you don’t require a referral for the care you need to receive. For most patients, that means they can stick with a doctor they already like and the billing aspect of care will be taken care of administratively.
Should you need to see a specialist and you are covered by a PPO, you’re not required to consult with your primary care physician. You can schedule an appointment directly with the specialist if you wish to receive a consultation. You’re not required to receive a referral for a hospital stay either.
Even if you’re traveling, if you need medical care, you are still able to choose any healthcare provider. Some of these providers may even have links to your in-network providers, which can help you save on the costs of the services you receive – even if you happen to be out of town.
What Are the Disadvantages of a PPO?
Preferred Provider Organizations do cost more as a health insurance plan. You receive more choices for the care you need, but at the expense of higher out-of-pocket costs when services are rendered.
You will find that the monthly premiums you pay and the copays for your appointments will cost more with a PPO. Most plans also require you to meet an annual deductible before other benefits will kick-in for you.
To help members of a PPO reduce cost, there is an in-network provider list from which to choose, which will offer services at a reduced rate compared to out-of-network providers.
That means a PPO is a solid choice if you want more control over your healthcare choices. You will pay more for that ability, but for those who travel frequently or have a favorite doctor who isn’t part of an HMO or other plan, this option can help you be able to keep your doctor.
Some PPOs want to limit the amount of out-of-network care you receive by setting higher deductibles for services you receive in that way. Although you technically have the choice to go see anyone you choose, most out-of-network providers will charge you the market rate for care. That may make it impractical for some households to obtain care from a provider of choice.
A Final Thought on the CDHP vs PPO Debate
A CDHP is an excellent choice for singles or couples who rarely need health coverage. Because you’re not using the benefits often and you aren’t visiting the doctor often, you are going to save some money each month.
The downside of that is many people with a CDHP avoid receiving care when they may require medical treatments. For some households, the costs of avoiding care now, to require it later on, are steeper than if the care was administered immediately.
If you have a chronic illness, then a CDHP will make it difficult for some to pay their out-of-pocket expenses, even with an HSA present.
A PPO offers an alternative for those who need healthcare appointments more frequently and want to be able to choose their providers. The upfront costs may be higher for some households, but the long-term savings from the lower deductibles will usually offset this need.
You are also allowed to make more of your own healthcare decisions when covered by a PPO. Instead of waiting for a referral or permission to have a procedure performed, you can schedule what you need right away. You can be admitted to any hospital or other medical facility that you choose.
When you have the right level of care in place for your family, trying to find a doctor when the need arises becomes a less stressful experience. Consider all the costs, weight the benefits and the disadvantages, and then talk to your employer or policy administrator about the plan you think will be best for you.