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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!

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

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.

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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 employer not make a contribution to your hsa?

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The benefits guide doesn’t mention anything about that honestly. They say they pay the “administrative fees” every month which I’m guessing just goes straight to the account manager and not into my account.

Ok that makes sense. Definitely seems like the PPO plan is really good based on the numbers.

This is the only company I’ve worked at full-time with benefits so I have nothing else to compare to.

They don’t mention it in the benefits guide, no.

Yeah but that’s just one visit. If I have to go anywhere else, I’d be paying in full until I hit the $2,000 deductible.

I can just make additional 401(k) contributions if I want to get the tax benefits.

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Then yeah that’s a turd of a plan

They don’t mention anything about free money in the benefits guide unless it’s a standard for all plans that I’m unaware of. That would be a game changer of course, but I don’t see it here.

Where does the $1200 come from?

I’m missing where it says the plan or employer makes an HSA contribution?

I'm not sure where this $1200 figure comes from, my company is definitely not contributing. I just pay a lower premium.

It's in every HDHP.

I had to fight for it a couple of different years, but it's a required thing for an HDHP.

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).

Most likely, those coverages are after your deductibles. And the out of pocket maximum is your deductible + copays after deductible. And then at that point they cover 100%.

So you would pay $400 of charges until you hit your deductible, then your 20% (or $40 specialist) copays until you've paid another $1600. So the most you'd pay per year out of pocket is $2000 (Not counting your biweekly premiums).

If that is how your plan is written, that's not bad for your biweekly premium rate. So even if you got really sick or injured and needed care tomorrow, worst case you're looking at getting $2000 in bills even if you had a $100k surgery + ICU stay. Still better to live healthy and not take unnecessary risks.

Does your employer offer additional short-term or long-term disability coverage? Some employers pay 100% for their employees or offer it for a very cheap subsidized deductible. I've had it fully covered where I'd get 80% of my current pay for both short and long term, or wound up being like just $4 or $5 a pay period. That adds up if you're next to broke, but as you get more established in life it seems relatively cheap for the peace of mind. Similar to how renters insurance is like $8-$10/month and if something happens you will be thankful you had it.

I have an HDHP and I definitely don't get a $1,200 contribution from my employer.

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Definitely not. Completely depends on the employer

No it isn’t. My wife’s HDHP contributes $750/year and mine contributes zero.

Literally every HDHP I've ever had and I've had them since they were available, has made the contribution.

From the plan.

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Typically, HSA plans start looking really good when (a) the company gives you a lump sum of money towards your account and (b) you are already maxing out your 401k and are looking for additional ways to invest your money and shelter taxes.

Your plan (if you are correct on everything) seems fairly unique to me (not that I have a ton of experience).

The difference in PPO and HSA cost per paycheck where I work is $100s per paycheck. They contribute a large sum to our account. And, the MOOP is fairly similar.

With all the above in mind, for me the HSA will about break even. But, I am also maxing my 401k, so the HSA will allow me to "save" even more.

In your case, the PPO might indeed be "better" for you.

Like all things "personal finance" it is indeed a "personal" thing that needs to be looked at on an individual basis.

Good luck!

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.

it is most certainly not

source?

Thanks. Really good reply. I’ve only ever had benefits at this company so I have nothing to compare it to. I didn’t realize that there’s usually a very high discrepancy in premiums.

The numbers seem better for the PPO plan and I’m also pretty far from maxing my 401(k), so I think I should focus on that goal first. I can definitely see how an HSA would be a good way to “boost” pre-tax savings beyond that though.

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PPO is def your best bet then

for a whopping max benefit of $300/year for an individual

Yeah, I've never seen that happen in the 3 different hsa plans I've had. You have to find your own account, unless you have an especially generous employer. Even then, there might be tax implications.

bingo

yep. not all HSA/HDHPs are the clear winner.

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.

This isn’t standard. Some employers contribute and others don’t. I’ve had 3 different HDHP plans and only one of the companies contributed to the HSA.

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Glad your employer contributes to your HSA, but many don’t, apparently including OP’s.

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sure, it's better IF they don't have a single other medical event for the entire year. That's not a bet I would make for $300.

That's completely bullshit. I work for a telecommunications company with billions in revenue and a worldwide presence, and not once in 15 years have they EVER contributed A SINGLE CENT to my HSA.

A sample size of one used as the basis to tell everyone else they're wrong is asinine.

Same. For a family, our PPO premium increase almost entirely equals the difference in the out of pocket maximums. So even if you max out our HDHP, you still basically break even with the PPO premiums. PPO only makes sense for people at my company who see out of network specialists.

They don’t mention an employer contribution in the benefits guide.

I guess it’s worth it if I’m maxing out the HSA and have funds to cover the higher deductible and out of pocket maximum but I’m not even maxing out my 401(k) yet so I think the PPO is better right now. I guess I’m fortunate that the premium and everything else is very affordable.

It’s not standard, employers often give this as an added perk. It’s $1,200 because that’s the IRS limit of what an employer can contribute (but only if they do opt to contribute).

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I mean I am googling it and I keep seeing that it is optional.

https://www.benstrat.com/downloads/HSA-GPS_HSAs-and-Employer-Contributions.pdf

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.

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Definitely not. You are eligible for an HSA (emphasis on ACCOUNT) when you have a HDHP, but your employer is under no obligation to contribute to that account on your behalf (although many do).

My experience is two different employers that put $500 annually in your individual account ($1000 family). The replies in this thread show a range of employer contributions, starting at nothing.

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.

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

>A sample size of one used as the basis to tell everyone else they're wrong is asinine.

You're doing the same thing. You say you've never seen it so I'm wrong.

All I know is that it's been included in the plan documents of every HDHP I've ever had. Twice with Aetna/Payflex, I've had to call and bitch about not receiving it.

Then I got it.

Yes. Because 5+ people saying you're wrong and that it's not every HDHP plan is certainly invalidated because you called YOUR PLAN admins and they did what they said they would in YOUR DOCUMENTATION FOR YOUR PLAN.....

Meanwhile, tons of us have HDHP plans with nothing given by the employer. Maybe someone that needs this info will be smart enough to read all sides and make a decision for themselves and not just blindly accept one side or the other....but let be honest....most of Reddit is Americans (like myself).....odds are bad.

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.

I guess I assumed it was every HDHP because every HDHP I've had, on/off spanning 23 years of working, has made the contribution.

The wording in my insurance documents say, specifically, "the plan will contribute....." so I just made the reasonable conclusion that the insurance plan is making these contributions and that they wouldn't be doing it unless required to do so.

Fuck me, right?

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

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.

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.

I will say that it’s very difficult to account for a PPO’s co-pay. For example, I had a baby last year and easily hit my deductible. That means my on-going PT appointments only cost me $7 each instead of $70! On a PPO they would have been $40 specialist visits. In a year that I didn’t have a baby and hit my deductible, those same appointment would have cost the full $70 and perhaps the PPO would have been more advantageous depending on the number of visits.

>f

When I first started working my current company, the PPO had a $0 deductible and $10 co-pay. Now the deductible is almost as much as the HDCP plan and the premium is 2-3X the HDCP plan.

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There's no set and fast rule on which is better because there's no consistency in the plans between companies. Really messed up system designed to lock you into an employer.

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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...

This is good calculation. But it has a missing part: the HSA contribution and the saved tax from it.

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!

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.

You don't have to be maxing out your 401k before investing elsewhere. By priority it goes 401k match -> max HSA -> max Roth IRA -> max 401k.

Your PPO looks way better though so it'll be up to you if you think access to the HSA is worth it.

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.

Exactly. My employer contributes $500 every year in to my HSA, which is able to be invested at $1000. We also have a healthy lifestyle program that you can earn extra HSA funds by doing things like syncing a Fitbit or logging your calories everyday.

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.

Yup. HSA is triple tax advantaged. Way better than 401K.

And… if you invest 3K every year into a HSA… at 8% growth you will get 285K tax free at 55…. Lol

Every HDHP plan I’ve contributed at least 1K.

Agree, and I acknowledged that. However, a lot of healthcare spending is/can be tax deductible. Premiums for sure, and other expenses can be paid out of an FSA if you’re on a PPO plan. Sure, there are tons of benefits to an HSA (no use it or lose it, investment options, etc.) but the short term tax benefits of an HSA aren’t all that different from an FSA if you’re just comparing annual medical costs and not using it as a vehicle for longer term savings.

Don’t get me wrong - I LOVE my HSA and max it every year. Having a big fat account built up during my younger years really cushioned the years I was pregnant and/or my kids had ER visits.

…65, and it’s only tax free if you use it for health expenses (which, admittedly, shouldn’t be an issue at that age). If you withdraw for other reasons (after age 65), you pay the tax.

I agree that it’s a fantastic investment vehicle and that’s why I max mine…especially because my HDHP will always cost me less than my PPO, even in “high cost” years. But in OP’s case it’s just not that clear cut, and they mentioned they still have some runway on their regular retirement accounts.

Does your employer fund your HSA at all?

I've had employers who have and employers who haven't. And of those who did, the amounts have varied; my current employer only contributes $650/year, but it's been as high as $1,000.

At least the ones who haven't contributed have offered the plan with no out-of-pocket premiums.

Oh that’s very true. The limited purpose FSA with HSA plan is also good but just limited to dental and vision before meeting the IRS deductible

Everyone needs healthcare whether you like it or not even at 35. It can also be used for vision and dental.

Thanks for the advice. I'll ask someone in HR about potential contributions when I get a chance. I missed the chance to change because the enrollment period ended last week so I'm locked into the PPO plan for 2023. I've been on that plan for 2 years now so I didn't think to change it. It crossed my mind today for some reason and I got curious.

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.

At my company the HSA eligible plan is the only one that has out of network coverage. There’s a new plan that the math says is a lot cheaper after 7 years on the HSA so I’m crossing my fingers.

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.”

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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.

As an example - my company has the same two offers for insurance and here is my breakdown :

1. PPO - premium 2500/year. $500 deductible. 90/10% after deductible

2. HDHP - premium 550/year. They contribute $500 to my hsa. Deductible $1500. 90/10% after deductible.

I suspect most at my company are taking #2.

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.

HSA can even be called a quadruple-tax advantaged account because contributions through payroll also reduce Social Security and Medicare taxes as well as Federal income tax and any state income tax. Love to knock down those FICA taxes!

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.

Ah excellent point

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.

Not sure you are correct on the $1200 limit, as my employer contributes $3000 total ($750 per quarter). The only limitation is the max $7300 for Families and $3650 for a single person. Keep in mind both employee and employer contributions are included in those max amounts.

What’s the max out of pocket for each? I have a similar setup and if I were to max out the PPO costs me 7K more per year.

Has this been the same employer or different ones? Your employer can choose to contribute $1200, but it is not legally mandated, and an employer can choose to have no contribution.

Ah gotcha! I wonder why so many have that same amount then.

just a coincidence perhaps, but it does equal to $100 per month