There is usually a greater difference in the employee premium between the two plans.

There could still be potential long term gains/savings by being able to max out the HSA yearly, but unless you're doing that and don't have anything outside of your yearly covered physical and one visit to your eye specialist it could quickly cost you more out of pocket.

Does your work offer an HSA contribution? That might be the difference.

My work gives a hefty HSA chunk of money each year in addition to our own contributions, which is enough for me to have chosen the HDHP plan.

My HSA plan is $75/paycheck and the PPO is $220. It is quite unusual for PPO to be so low. Definitely take that option.

HDHP is not optimal for every individual situation. In your case going with the PPO probably is better.

Yeah, your PPO and HDHP are priced unusually closely. With my employer the difference between them is $60 per month.

Is there an employer contribution? That could make up the difference. Also, if you can knock yourself into a lower tax bracket by contributing more to the HSA that could be worth something. Otherwise, I agree with your assessment.

Does your employer not make a contribution to your hsa?

I’ve been roasted on PF for suggesting that HSA/hdhp might not always be the best option. I don’t think people realize how much variation there is from plan to plan and from one employer to another. In your case, PPO does look clearly better. I always say you should get the best coverage that you can afford and that makes sense for your life situation. I think that becomes even more important as you get older and health problems start to creep up.

You’re not missing anything. This situation is unique in that this particular HDHP offered is not substantially better than the PPO offered.

I made a graph. Your break-even (not accounting for tax benefits of using an HSA) is if you incur about $900 in non-copay healthcare costs.

PPO: $1608 premiums + $400 deductible + 20%*($900-400) coinsurance = $2108 CDHP: $1224 premiums + $900 toward deductible = $2124

At less than $900 in medical costs, the CDHP is between $0 and $384 cheaper ($384 is the difference in premiums assuming you have no other medical bills). Above $900 in costs, the PPO is between $0 and $1616 cheaper ($1616 is the difference in out of pocket max minus the difference in premiums).

That potential $384 in premium savings with the HDHP isn’t super compelling, especially given that you have a guaranteed annual medical expense (the eye specialist) that gets you nearly halfway to the break-even.

By the way, I made a similar graph/analysis comparing my employer’s PPO and HDHP offerings for an individual. There is NO break-even point - the HDHP is at worst $321 cheaper than the PPO, and at best $1400 cheaper. In years that I have no medical expenses, which is fairly typical for me, I pocket the entire premium difference of $571 plus my $500 employer contribution to my HSA.

HSAs are a great place to stash extra money tax advantaged. But that’s if you have extra money.

By getting the HDHP, you can contribute to an HSA, which is a literal savings account. Just like an FSA account, you put in money that's not taxed, and it's also not taxed when you take money out of it to spend on medical expenses. Unlike an FSA account, however, the money in the HSA account at the end of the year stays yours. (Whereas, with an FSA, it's a "use it or lose it" kind of thing.) I believe you can contribute more to an HSA than you can to FSA, too.

If you can actually keep a portion of the funds you contribute to HSA each year while on the HDHP, then you'll have the benefit of a HSA (which also acrues interest) which can build a safety net for future medical expenses.

If you can't save what you're contributing to HSA while on HDHP, then there's likely no reason to get the HDHP at all. Even if it could save you a lot in terms of withholdings from your paycheck, as you've pointed out, the HDHP makes you shell out a lot of money before offering any coverage--so it only saves you money if you can avoid any and all medical costs, which is basically a gamble.

In my experience, HDHP and PPO plans tend to have a larger cost divide than what you described. That also factors in...

If you do not have regular healthcare costs, and have a high tax rate, the HDHP is almost always the better move. I personally had some pretty significant healthcare costs this year (spinal surgery) to max out my deductible (hadn't had any claims in like the 12 years prior) and have a decent taxable income. The tax benefits of the HSA would have effectively covered my entire deductible, even just looking at this year.

If you don't have significant regular healthcare costs, in 2-3 years you will likely build up an HSA account that will cover your annual max out of pocket. If things change, you can adjust your healthcare coverage as pre-existing conditions don't affect your rates.

The higher your income, and the less-significant your regular healthcare costs are, the better HDHP with HSA becomes.

Several years with my current company but now in a different role that offered me the option of an HDHP. In my particular case, PPO premiums were jumping up to 160 a month whereas the HDHP was zero dollars in premiums and my company contributes 1500 each year to my HSA. I don’t tend to make a lot of medical trips not fully covered in my plan, but from my companies contribution, any contributions I make, and the money I save from premiums, I could easily pay my deductible if need be, otherwise it’ll be invested.

Welcome to /r/personalfinance! Comments will be removed if they are political, medical advice, or unhelpful (subreddit rules). Our moderation team encourages respectful discussion.

You may find our Health Insurance wiki helpful.

I am a bot, and this action was performed automatically. Please contact the moderators of this subreddit if you have any questions or concerns.

[deleted]

[deleted]

Try doing a graph with the amount you pay against your expenses for the PPO. Do the same for HDHP but shift it down by the employer contributions to the plan and the total difference in premiums. If the amount you'd expect to pay for your expected health costs is less for HDHP versus the PPO and you are able in an emergency to pay up until the out of pocket maximum then HDHP is far better (since this doesn't account for the fact the HSA is also an investment vehicle).

Some plans have high copayments where a low deductible like $2000 and then 20% after may be cheaper.

I see an acupuncturist 24 times a year and 6 other specialists along with my primary, lab work, medications. I would hit $2000 very quickly.

Once I do, I then pay only the 20%, which is probably less than $45.

Plus you can contribute to an HSA and save significantly for several years and then switch to a better plan and have that money to use whenever.

This is funny to read cause I just ran into the sane exact situation at my work.

Often an HSA is ideal for young people because after a couple years of making contributions you have a nice balance built up. Also employers tend to contribute more to an HSA (not always but some do).

A PPO plan, your money is gone at the end of the year and there is nothing to roll over. Nothing to take with you to the next job if you leave, etc.

You’re young and single. Not all employers increase their portion of premium assistance when you add a souse and kids. I know there’s a similarly small difference between ppo and hsa for me to get single coverage but when you look at the family cost (I’m a family of four) it’s stark. Like 1600/month for hsa plan and a whopping 2400/month for the ppo.

Is your employer contributing any dollars to your Health Savings Account? Most seem to. If they do, that might sway you to do the HDHP. But your PPO plan is really awesome...and cheap!

Yea that's a little odd. We just revamped benefits for a new org (merger) and the biweekly contribution on the HSA for a single is less than $20 (ded $3k) plus the company contributes $500 to the HSA. The PPO is just over $60 biweekly. Both fairly similar plan designs to what you mentioned. I personally like to encourage everyone to be a good consumer and be thoughtful about how they shop around for healthcare, but HDHPs are not for everyone.

I (33F DINK and healthy lol) would probably still go with the HSA in your shoes just to have the opportunity to contribute to the account. Since it can be used for so many OTC items (most of which I purchase on Amazon so have good order history) it's more flexible than locking it up in a 401k. So I max out the match on 401k, then the HSA. (Quick edit, I missed the eye specialist part - I'd still probably go with the HSA but that choice would be because a. I already have a solid HSA balance b. I'd still rather continue to save in a tax advantaged way for procedures/expenses in the future... like Lasik in my case)

I would also recommending confirming with someone in HR/benefits that the company does/doesn't contribute to the HSA. I have seen some companies not cover it in their enrollment material for some reason.

My company also gives $1000 for an individual into the HSA every year so make sure you're not missing something like that in your calculations.

HDHP allows you to invest. I contribute the max every year. My growth far exceeds the amount I spend every year.

Does your employer fund your HSA at all?

Is what the doctor charges mean what insurance pays? Usually it’s what the dr charges, what insurance allows, and what you owe.

With such a small premium difference it’s harder to find a positive, but the tax savings are nothing to sneeze at if you can max it.

HDHP/HSAs make sense if you are using them as a long-term savings vehicle. This works when you don’t have many claims and can afford to stash money into the HSA and invest it for the long term.

My family has a lot of (relatively predictable) claims. When given the option, I have always taken a PPO/FSA over a HDHP/HSA. The math has always worked out in our favor to avoid the HDHP. If you know you will have a major medial claim (like childbirth, surgery, etc) you probably don’t want to be on an HSA if you have the choice.

Everybody’s circumstances are different. Personally, I want cost-sharing to kick in sooner, and I can get that with copays and a lower deductible. My last 2 plans had $10-15 copays for specialists. There’s no way in hell I’d give that up for $200 specialist visits with a $4,000 deductible.

Some people want to take advantage of an HSA so it acts more like a retirement account, and that works for them. Everybody is different. Just don’t get sucked into the trap of one being better than the other. There are too many variable and the answers is always “it depends.”

What's the out of pocket limit on each plan?

Does the employer provide any deductible funding for the HDHP?

It's certainly possible your employer structured their contribution policy poorly, but generally there's something that would explain why there's such a small spread on those plans.

Well, the HDHP serves as a lower cost plan for the employer to offer. If you are younger and healthy, you may want the cheapest plan but enough coverage to take care of the big ticket items like a long hospital stay and such. If you make decent money, you may opt for the PPO since it is marginally more for each check but you do have more choice of course. Also, check that HDHP plan of yours. Rx drugs are covered after the ded usually, so if one is on medicines that may not be the best plan.

The point of the HSA isn’t to save money on healthcare (although that’s how it’s advertised). The point of it is to save for end of life care which will likely be in the $100k-$200k range and isn’t covered by insurance.

Yes, that is rare. The difference in premiums between my company’s PPO and HDHP is almost $12k/year more for the PPO

Look at the pricing for family coverage for the HDHP vs PPO. The difference in price is probably much larger!

Opposite situation for me. The amount of money the employer puts into the HSA, plus the tax savings from the HSA, plus the difference in premiums is greater than the annual maximum from either plan, so it effectively never makes sense to take the PPO.

What sold me on HDHP was lowering my taxable income, the monthly pass-through, and utilizing the investing programs. Here is our process, we have a credit card that we use for miles, we pay our health expenses with our cc and then submit receipts for reimbursement from Health Savings Account. So essentially we're receiving miles on our health costs and paying our cc with tax free money.

As others have said, usually there's a greater difference in the employee premium. Also many employers offer a yearly HSA contribution, so a lot of the money you spend towards your specialist visits are from the employer rather than out of your own pocket.

In this scenario where neither of the above scenarios are the case, I agree the PPO seems way better.

The HSA is the main advantage here. The HSA is absolutely an insane account. There is literally no better account. Its a triple tax advantaged account with no age limits. So you can put money into it to receive deductions, you use that money to invest, and when you spend that money you don't pay taxes. Its a ridiculously OP account and should be used 100%.

You're basically building a long term + retirement healthcare fund for yourself. It will save you a ton of money later because you won't have to spend after tax dollars on healthcare. Remember you can also use the HSA to buy a lot of things you wouldn't expect too like feminine products, tylenol, various services, genetic tests, massagers, dentures, etc.

To be honest a person is being really stupid if they don't use an HSA.

While I understand why people want to park money in an HSA I think it also ignores the reality of healthcare costs in the US. A single moderate or major healthcare emergency is going to wipeout your HSA and leave you on the hook for potentially thousands or tens of thousands in healthcare expenses.

You have to use your best judgement and decide if the tax advantage of an HSA is worth it versus the potential out of pocket expenses you may pay from either regular care or a more substantial healthcare event. It sounds like in your case you may not contribute enough to the HSA to make the delta between your contributions and out of pocket costs a wash and you would actually be paying more.

You're leaving out the $1200 that the plan pays into your HSA that's free money. You can also contribute more if you want, invest that money and let it grow tax free. A young person with generally good health, the hdhp programs are a great deal.

If you get the hdhp, look into using Lively as your HSA manager. They are great!