An HDHP is a high-deductible health plan. It is a form of health insurance which offers a higher deductible than other forms of traditional health insurance. The higher deductible means that the monthly payments for ongoing coverage are usually lower. It also means that you’ll be paying more of the healthcare costs for your family before the insurance pays its share.
You do have the option to combine an HDHP with a health savings account, or HSA, as a way to pay for healthcare expenses with money that is free from federal taxation.
Any health plan with a deductible of at least $1,350 per person, or $2,700 for a family, qualifies as an HDHP. Under the current laws, a family’s total out-of-pocket expenses, which includes copayments, coinsurance, and deductibles, cannot be more than $6,650 for a person or $13,300 for a family.
A PPO is a Preferred Provider Organization. It operates with a network of healthcare providers that you would see for your medical needs. You are permitted to visit doctors in your network or outside of it, without the need for a referral. A PPO does not require you to select a primary care physician either.
The costs of a PPO are sometimes higher than other insurance plans but tend to be lower than that of an HDHP. If you stick with in-network providers with your PPO, then the costs can be quite affordable for most families.
When comparing the HDHP vs PPO health insurance plans, you will find several pros and cons to consider for each one.
List of the Pros of an HDHP
1. It provides a lower cost for employers and employees.
An HDHP will usually mean a lower premium for employers who offer health insurance as a benefit. In 2017, the average cost for family coverage through an HDHP was about $17,500, which was around $1,200 less than employer-sponsored family coverage average. Some plans are $3,000 to $5,000 less than the average. Employees often play less as well, with some premiums less than what you would pay for PPO coverage.
2. An HDHP still covers basic preventative services.
The biggest complaint about an HDHP is its overall cost. What many people do not realize if they’ve never had an HDHP before is that basic preventative services are still offered with a majority of the plans. That means you can still often receive generic prescription benefits, annual checkups, and vaccine administration for a minimal cost.
3. You’re not forced into a narrowed network with an HDHP.
Some HDHPs might have negotiated rates with certain providers to help save some money for their patients. Others may choose to discount certain services which are provided, such as a health checkup, a blood test, or other common services. Many allow for the flexibility to choose your provider, even if it isn’t part of an established network.
4. If you don’t use healthcare services a lot, you’ll save money.
People who rarely visit the doctor will find that the coverage provided by an HDHP gives them a safety net should something happen, yet keep more money in their pocket compared to other forms of health insurance. If you rarely need to access your health benefits, the deductibles won’t be much of a concern. If something catastrophic happens, you’ll still benefit from a maximum out-of-pocket expense provision within the terms of the plan.
5. You benefit from the availability of market rates.
When you do visit a provider that is located within the HDHP network, you will get to benefit from the negotiated rates between the provider and the insurer. These rates are below market rates, which means your out-of-pocket expenses will still be lower than if you visited an out-of-network provider, like you could do with a PPO.
6. An HDHP allows you to open an HSA.
Unlike other forms of tax-advantages health savings, the HSA does not have its funds expire. That means the money you save now can build and grow for the next 2 years until you need to make a withdrawal for a qualifying medical expense.
List of the Cons of an HDHP
1. An HDHP is good for specific groups only.
An HDHP is an option to consider for people who are single, young, or don’t need coverage because their spouse already has healthcare insurance. If you are likely to be healthy and only need basic preventative services, this is a viable option. For those who have ongoing healthcare needs, or have a family that requires coverage, the costs of an HDHP can be quite high.
2. The deductibles with an HDHP can reach 5 figures.
For an individual using an HDHP, the deductible can be as high as $6,650, although some plans may have a deductible lower than $1,500. Families using an HDHP may have a deductible as high as $13,300, though some plans may have an option with a deductible lower than $3,000. Should a medical emergency occur, the high deductible cost may require households to negotiate payment plans with a provider. That creates a long-term cost that may be difficult to pay off.
3. Many avoid medical care when using an HDHP.
Because the costs of healthcare coverage are higher when using an HDHP, families tend to avoid seeking out care when they need it as a way to reduce their costs. Procedures might be delayed because they can’t meet the requirements of the deductible and the facility refuses to use a payment plan. Over time, that can lead to a lower quality of health, which makes employees less productive and costs more in the long run.
4. You cannot use your HSA with other health insurance plans.
If you are using a health savings account to offset the costs of your healthcare needs, then you are not permitted to utilize a non-HSA insurance option at the same time. You cannot be enrolled in Medicare and take advantage of what a health savings account is able to provide. For some Middle Class households, this structure puts them into a disadvantaged situation. They may earn too much to qualify for Medicaid, earn too little to afford their deductible, and not have any employer options which give them additional choices.
List of the Pros of a PPO
1. You’re not forced to wait for a referral.
With a PPO, you can schedule an appointment with any doctor or provider you choose. You can admit yourself into whatever hospital you prefer. There are no restrictions on referrals when attempting to see a specialist for a health concern. Because there is no need to name a primary care physician, you can save money because you’re not forced to have extra office visits or copays to get where you need to be.
2. There isn’t a need to file claims with a PPO.
The PPO structure is based on a negotiated arrangement between the insurance company and the medical provider. These two agencies coordinate with the payment process together. If you have a copay responsibility, then you’ll pay that portion of it at the time services are rendered. Then the provider submits the service claim on your behalf. The insurance company will review the claim, likely approve it, and then send you a summary of the services and costs. Anything that continues to be your responsibility will be clearly outline and you will know why.
3. Most PPOs are setup to have smaller deductibles.
Compared to an HDHP, the deductibles that are required by a PPO are often much less. Once you meet the deductible requirements, many PPOs will pay 80% or more of the services that are rendered. You would then be responsible for the other 20%. The features of this setup depend upon the plans you choose, so some patients may have all services covered once they reach their deductible limit.
4. There is more flexibility with who you can see.
When you are covered by a PPO, you can go to any medical facility and receive your plan benefits. This flexibility comes with an extra charge, and you may not receive negotiated discounts like you would if you stayed in your network, but this can be beneficial. If you wish to see a specialist, receive a second opinion, or have a specific diagnosis which requires an out-of-state doctor, the PPO reduces the administrative requirements you’ll be required to follow to get the care you need.
List of the Cons of a PPO
1. Only in-network providers reduce the need for claims.
You get the benefit of not needing to file claims when you visit an in-network provider with your PPO. If you visit someone outside of your network, then the negotiated agreements are not likely present. That means you’ll need to take the information provided by the medical provider to file a claim with the insurance company. If you visit several doctors and have a complex diagnosis, the administrative requirements to receive coverage could become a logistical nightmare.
2. There is still a cost to consider with a PPO.
Most PPOs are going to require a copay, usually $40 or less, when services are rendered at a medical file. Some appointments, like an annual checkup or vaccinations for the kids, may have a reduced copay or a $0 copay, but others might require the cost to go towards your deductible. In a typical PPO, the deductible tends to be $1,500 or less, but families may see a deductible between $4,000-$6,000 for everyone.
3. It does not usually qualify for an HSA.
Unless the PPO qualifies as an HDHP, then it will not qualify for a health savings account. That means you’re forced to use post-tax money to pay for your medical costs. If your medical costs do not reach 11% or more of your total income for the year, you’re not permitted a tax benefit from your costs either. That means for a family earning $60,000 per year, they would need to exceed their deductible by 50% before the costs could be beneficial.
4. To keep costs low, you may be forced to opt for a high-deductible option.
If you’re wanting some flexibility with your PPO, then the only real option you have to keep your healthcare insurance premiums low is to opt for a higher deductible. Once you reach a certain deductible level, the benefits of choosing a PPO are negated when compared to the HDHP. That is especially true for PPO plans which do not offer HSA compatibility.
The pros and cons of an HDHP and a PPO must be carefully considered when choosing the best health insurance options for yourself and your family. Each offers certain measures of flexibility that could be beneficial to some. The costs that this flexibility provides must also be considered. By comparing each key point listed above, you can better determine if one of these plans is a good option for you.