About 8% of Americans, or around 27 million, are uninsured. If you’re uninsured, the costs can be risky, especially for health-related reasons.
A single injury or illness can trigger bills for emergency care, lab work, imaging, prescriptions, and follow-up visits.
For those considering health insurance plans, your options include HDHP and PPO. But which one is right for you?
What Is an HDHP?
An HDHP, or high-deductible health plan, is health insurance with a high deductible and a high out-of-pocket maximum.
The plan charges a lower monthly premium than many traditional plans. You pay more of the bill yourself before the plan starts paying.
What Is a PPO?
PPO stands for preferred provider organization. This plan uses a network of doctors and hospitals that agree to set rates for members, and it usually costs more per month than an HDHP.
A traditional PPO also has a lower deductible and a lower out-of-pocket maximum than an HDHP.
Key Differences Between HDHP and PPO Plans
| Feature | HDHP | PPO |
|---|---|---|
| Monthly premium | Lower monthly cost | Higher monthly cost |
| Deductible | Higher deductible than a PPO | Lower deductible than an HDHP |
| Copays | Copays may start after you meet the deductible for certain services | Copays may apply even before you meet the deductible for certain services |
| Coinsurance | Coinsurance may apply after you meet the deductible for certain services | Coinsurance may apply before or after you meet the deductible for certain services |
| Out-of-pocket maximum | Lower out-of-pocket max than a PPO | Higher out-of-pocket max than an HDHP |
| Preventive care | Preventive care is generally covered at 100% before you meet the deductible | Preventive care is generally covered at 100% before you meet the deductible |
| Provider network | Network rules depend on the plan | More provider and facility choice through the plan network |
| Out-of-network care | Out-of-network coverage depends on the plan | Out-of-network care is generally covered, with higher out-of-pocket costs |
| Primary care doctor requirement | Requirement depends on the plan | No primary care doctor requirement |
| Referral requirement | Requirement depends on the plan | No referral requirement |
| HSA eligible | Yes | No |
| FSA eligible | Limited-purpose FSA only | Yes |
| Marketplace availability | Yes | Yes |
Pros and Cons of an HDHP
Before choosing an HDHP, review its benefits and the costs you may need to cover.
Pros
- Health Savings Account (HSA) access: You can contribute to an HSA only during the months you enroll in a qualified HDHP. An HSA allows pre-tax contributions, tax-free investment growth, and tax-free withdrawals for qualified medical expenses. Unused HSA funds roll over each year for future healthcare costs.
- Lower monthly premiums: Employees with individual HDHP coverage paired with an HSA may pay an average monthly premium of $640.
- Employer HSA contributions: On average, employers contribute about $660 per year to individual HSAs and $1,200 per year to family HSAs.
Cons
- Higher out-of-pocket costs early in the year: The higher deductible puts more of the initial cost on you before coverage starts paying.
- Care delays: High out-of-pocket costs can lead some people to postpone medical visits, which can turn smaller issues into more expensive problems.
- Higher financial exposure: A sudden illness or injury can leave you paying thousands of dollars out of pocket before insurance starts covering costs.
Pros and Cons of a PPO
A PPO has a few practical advantages, but it also entails higher costs in certain areas.
Pros
- Lower deductible: You reach the deductible sooner, so the plan starts sharing eligible costs sooner.
- Specialist access without referrals: You can schedule specialist care without a referral from a primary care doctor.
- Out-of-network coverage: The plan can pay part of out-of-network care, though you pay more, and balance billing may apply.
Cons
- Higher monthly premiums: PPO plans charge more per month than HDHPs.
- No HSA access: HSA contributions apply only during months enrolled in a qualified HDHP, so a PPO points you toward an employer FSA instead. FSAs require spending the funds by the deadline to avoid forfeiting the remainder.
- Separate out-of-network deductible: Many PPOs set a second, higher deductible for out-of-network care, which increases your out-of-pocket costs if you go outside the network.
Cost Breakdown: HDHP vs. PPO
Here is how an HR department’s open enrollment brochure might compare both plans.
Premiums, Deductibles, and Out-of-Pocket Costs
| HDHP | Traditional PPO | |
|---|---|---|
| Bi-monthly premium (individual) | $10 | $75 |
| Bi-monthly premium (family) | $35 | $215 |
| Deductible (individual) | $2,600 | $500 |
| Deductible (family) | $5,200 | $1,500 |
| Out-of-pocket maximum (individual) | $5,500 | $1,500 |
| Out-of-pocket maximum (family) | $11,000 | $4,500 |
When an HDHP Is Also a PPO
Some HDHPs operate through a PPO network. Enrollees on the high-deductible plan get access to the same doctors and hospitals as PPO members, which can reduce the cost of in-network care even before the deductible is met.
Which Plan Is Right for You?
The better plan depends on how much healthcare you use in a year and how much you can pay out of pocket for surprise expenses.
Questions to Ask Yourself Before Choosing
- How much can you afford to pay in monthly premiums?
- Can you cover a higher deductible if unplanned care comes up?
- Will your current doctors and specialists be in network?
- Do you want the option to go out of network?
- How many times do you expect to use medical care this year?
- Do you have any procedures or treatments already scheduled?
- Does your employer contribute to an HSA or FSA?
Who Benefits Most From Each Plan
People who stay relatively healthy, use little medical care in a typical year, and want to build HSA savings tend to get more value from an HDHP.
High earners also benefit more from the HSA’s pre-tax contributions because the tax savings are larger at higher marginal rates.
Meanwhile, people with ongoing health conditions, regular specialist visits, or planned procedures tend to do better with a PPO.
Families with young children can also benefit more from the PPO’s lower deductible since pediatric care generates more frequent claims throughout the year.
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Frequently Asked Questions
How do HDHPs affect taxes?
Enrolling in an HDHP makes you eligible to contribute to an HSA, where contributions are tax-deductible, interest grows tax-free, and withdrawals for qualified medical expenses are tax-free. Unused HSA funds roll over each year with no expiration.
Can I deduct my health insurance premiums on my tax returns?
Self-employed individuals can deduct 100% of health insurance premiums as an adjustment to income on Schedule 1 of Form 1040. Employees can only deduct premiums as a medical expense if they itemize deductions and their total medical expenses exceed 7.5% of their adjusted gross income.
Why do doctors prefer PPO?
PPO plans give providers more flexibility because patients can visit any in-network or out-of-network doctor without needing a referral or prior authorization for most services. This also means fewer administrative steps and faster access to specialist care compared to plans that require referrals.
The Bottom Line
Reviewing your plan options each open enrollment cycle helps you catch changes in premiums, deductibles, and employer contributions. Life changes like a new job, a growing family, or a new diagnosis, can shift which plan saves you more. Comparing both plans with your actual expected costs will give you the most accurate answer.
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