It can be difficult to choose the right healthcare plan for yourself. After reviewing your benefits during open enrollment or when you start a new job, there may be more questions than answers.
Two common options for employers offering health insurance are high-deductible health plans (HDHP), and preferred provider organization plans (PPO). Each plan is not always better than the others. The best plan for you depends on your individual circumstances. Based on a person’s circumstances, it may vary from year to year.
You can make a better choice by comparing the costs and coverage of HDHPs and POs.
HDHP vs. PPO
High deductible plans are a type or health insurance that has higher deductibles and lower premiums. While you will pay less each month, you’ll have higher out-of-pocket medical expenses and more coverage before your insurance coverage starts.
A preferred provider organisation (PPO) plan is one that has lower deductibles and higher monthly premiums. While you will pay more each month, your out-of-pocket medical costs are lower and you may be able access to a wider variety of providers or services.
“HDHPs are typically beneficial to healthier consumers who don’t expect to require much medical attention over the year, and there are lower monthly premiums,” says Susan Beaton, former VP of Provider Services, Care Management, and Risk, Blue Cross and Blue Shield.
Beaton states that a PPO, particularly one with a low-deductible, might be a good choice for those who are likely to have frequent doctor visits or prescriptions because of a chronic condition.
The pros and cons of HDHP combined with HSA
An HDHP is valuable for people who don’t anticipate needing to pay a lot of medical bills throughout the year. HDHPs are most beneficial for people who are younger, without children, or otherwise in good health. You may not be eligible for a copayment at doctor’s appointments with an HDHP Plan until your high deductible is met.
Beaton advises, “Be sure that you ask your employer if they offer an HDHP with Health Savings Accounts (HSA),” You may be eligible to choose to have an HSA with employer contributions when you select an HDHP. Sometimes HSAs cannot be offered to employer-sponsored PPO plans. However, it is possible to use a flexible account ( FSA ) with certain PPO plan types.
A HSA pre-tax savings account is used to pay for medical expenses. This savings account can be used to roll over money year after year. However, the annual max contributions differ between individual plans ($3,550), and family plans ($7.100).
A HSA is a great option because it can use pre-tax dollars and earns tax-free income. HSAs can be used to cover many eligible expenses such as prescriptions, medical care, vision, and dental care. Even if you move or change jobs, your HSA funds will remain with you. You can also share them with your family.
HSAs and HDHPs are becoming more popular, particularly for younger people. Although an HSA might seem appealing, fees can be charged for maintenance and the use of your HSA debit card at the doctor’s or pharmacy.
You must also keep track of your expenses and submit receipts to your HSA admin for approval of qualified medical expenses. If they are not eligible expenses, some claims may not be covered by HSA administrators. Before making any questionable purchases at a pharmacy, or anywhere else, check with your HSA administrator.
According to the Affordable Healthcare Act, taxes and a 20% penalty will apply to HSAs that you use for non-qualified expenses. Despite being viewed as an emergency fund by some, an HSA is often viewed more seriously than that.
The pros and cons of PPO
People who expect to have more medical expenses in the coming year will benefit from a PPO. These plans are beneficial for seniors, families with children, and those who have chronic health conditions.
A PPO might make sense as you get older, have to deal with health issues, or provide support for your family. Although PPOs come with higher monthly premiums but can save you money in the long-term if you require healthcare services often. You can get more coverage for your medical expenses by investing in your health insurance over the course of the year.
Additional flexibility is offered by PPOs. PPO plans allow you to choose the hospital or doctor that suits your needs best. Your insurance will often cover them even if they’re not in your network. A PPO allows you to see a specialist and have a procedure done or test without the approval of your primary care doctor. A PPO plan might be more suitable than an HDHP if you value flexibility in your healthcare decisions.
Which plan is the best?
We’ll now discuss how to decide if an HDHP plan or a PPO plan is better for you. Consider the following questions first:
- How often do your visits to the doctor occur?
- Are you suffering from a chronic condition that needs frequent treatment?
- How often do your needs for emergency care change?
- Are you planning a surgery?
- Are you planning to have a baby in the next year?
- Are you able to support your spouse and child’s medical bills?
- Flexibility is crucial when choosing a doctor.
- Flexibility is crucial for seeing a specialist.
A PPO is better than an HDHP if you visit the doctor frequently, have a chronic condition, need emergency care often, plan to have surgery, care about flexibility and support multiple family members’s medical costs. If you don’t care about any of these things, an HDHP will be more suitable for you.
Not all health insurance options are available through HDHP or PPO plans. There are also Health Maintenance Organizations, Exclusive Provider Organizations and Point of Service plans.
Calculator HDHP vs. PPO
These terms will help you understand how to calculate the cost of health insurance. Before you decide between the two, estimate your annual medical expenses. An uninjured person may not have any estimated expenses. They should still consider the possibility that they might get the flu or sustain an injury.
After estimating your medical expenses, add the monthly premiums of each plan to their respective out-of pocket limits. This number is your maximum out-of-pocket cost for the year, assuming you receive in-network care.
A PPO plan might have a $1250 deductible and a $600 monthly premium. This is $8,450 per year, excluding copays and coinsurance. The out-of-pocket maximum for Group Plans in 2020 will be $8,150 for individuals, and $16,300 to families. This limit may not apply to you, but it could be less or equal.
An HDHP might have a $3,000 deductible and a $400 monthly premium. This amounts to $7,800 per year after multiplying the monthly premium ($400 x 12), and adding the deductible for any out-of-pocket expenses. The 2020 out-of-pocket limit for HDHPs is $6,900 for individuals and $13,800 for families. You can therefore expect your out-of pocket costs to be equal or lower than the limit.
The second example shows that you will pay $200 less per month for the premium, and save $900 annually, excluding copays or insurance.
Beaton states, “If the out-of pocket cost for HDHP is lower that the PPO option it would seem like the smart decision would be to choose HDHP.” But, you should ensure that your budget is able to handle this decision before making it. Is it possible to pay $250 for an office appointment on the day of your visit or $800 at the emergency department, up until your deductible is met? You should reconsider your decision to choose the HDHP plan if you don’t have the budget to pay for the additional costs.
A PPO plan that has a higher monthly premium but provides more coverage may be more cost-effective in the long term. This is particularly true for those who calculate that the HDHP will cost more out of pocket or those who don’t want to risk unexpected medical expenses throughout the year.
There are other factors to be aware of
The decision to purchase a health insurance policy is an individual one that must be made taking into consideration many factors.
- Your health
- The health of your family
- Healthcare providers and specialists can choose to be flexible
- Your financial situation
- You can decide whether you are able to pay more upfront for premiums in order to get more coverage
- How much HSA money you can use
- Each policy has a spending limit that is out of pocket.
You can still get help selecting a plan by consulting a HR person or a health agent. Open enrollment allows you to modify your plan each year or to reflect changes in your life. You can qualify for open enrollment if you have experienced marriage, divorce, or the birth of a child.
SingleCare: Save!
SingleCare Coupon are available for all pharmacy customers, regardless of your insurance coverage. SingleCare can be used to get discounts on many prescriptions even if you don’t have insurance.
SingleCare is not health insurance and cannot be combined with any other health insurance. SingleCare coupons do not apply to prescriptions.
