Workplace Benefits
Choosing the right health plan during open enrollment or a qualifying life event is of the utmost importance since it dictates your care and associated costs for the year. With so many options, acronyms, and policy rules to consider, picking a plan can feel tricky.
Ahead, we explore two of the most common health plans: HDHPs (high deductible health plans) and traditional PPOs (preferred provider organizations).
HDHPs |
Traditional PPOs |
Lower monthly premiums |
Higher monthly premiums |
Higher deductible and out-of-pocket maximums |
Lower deductible and out-of-pocket maximums |
Typically grants access to an HSA |
May not grant access to an HSA |
Note: This table discusses the main differences between a high deductible health plan and a traditional PPO plan with a lower deductible. However, HDHPs can be part of a PPO network. More on that below.
An HDHP, or high deductible health plan, is a type of health insurance plan that features higher deductibles and out-of-pocket maximums with lower monthly premiums in comparison to a traditional health insurance plan.
HDHPs can be ideal for customers who only make occasional visits to their doctors. With higher deductibles and out-of-pocket maximums, the value of an HDHP can start to diminish as visits, procedures, and prescriptions become more frequent.
A preferred provider organization (PPO) is a health insurance plan that works with a network of providers who offer certain rates for those enrolled in the plan. Members typically pay a higher monthly premium for these health plans than they would for a high deductible health plan.
On the flip side, a traditional PPO plan typically has a lower deductible and lower out-of-pocket maximum than an HDHP. For customers who visit their doctor often, lower deductibles and out-of-pocket maximums could help lead to savings once all their medical expenses are paid.
For example, let’s say you receive a medical bill for $5,000. Under an HDHP, your deductible might be $3,000. That means you’ll be required to cover $3,000 of the bill before your insurance provider covers the rest. With a PPO, you might only have to contribute $1,500 before your coverage kicks in.
Here’s how an HR department’s insurance brochure might look if it offered an HDHP and traditional PPO for open enrollment.
|
HDHP |
Traditional PPO |
Bi-Monthly Premium |
Individual: $10 Family: $35 |
Individual: $75 Family: $215 |
Deductible |
Individual: $2,600 Family: $5,200 |
Individual: $500 Family: $1,500 |
Out-of-Pocket Maximum |
Individual: $5,500 Family: $11,000 |
Individual: $1,500 Family: $4,500 |
Sometimes a high deductible health plan is part of a PPO network. While that sounds complicated, all it means is that people on the high deductible health plan get access to the PPO’s network of providers. They still pay higher deductibles and out-of-pocket maximums in exchange for lower monthly premiums.
If you enroll in an HDHP, you typically get access to a health savings account (HSA). An HSA can be used to cover the costly deductibles in a high deductible health plan, as well as prescription medications or other medical expenses. Funds are not taxed and are typically deposited into an HSA as part of a payroll deduction.
Learn more: What Can I Use My HSA For? Including Some Surprises
If you enroll in a traditional PPO or lower deductible health plan, you may be eligible for a Flexible Savings Account (FSA) vs an HSA. Similar to HSAs, FSAs can help cover out-of-pocket medical expenses. Funds are not taxed and are typically deposited into an FSA as part of a payroll deduction. However, FSAS typically come with more restrictions than HSAs — including rollover limits and lower deposit maximums.
Any lower deductible health plan, including PPOs, can come with an FSA. Here’s how FSAs work and how they can benefit your bottom line:
While FSAs are usually paired with lower deductible health plans, they might still be available with a high deductible health plan. Be sure to check with your employer and insurance provider to find out what health savings and spending accounts you can use under your specific plan.
Learn more: 2023 FSA-Eligible Items & FSA-Eligible Expenses
Regardless of which insurance plan you choose, it’s always a good idea to take advantage of the savings opportunities your health coverage provides. Setting aside some money in an HSA or FSA can help prepare you for medical expenses, whether they result from a high deductible or a traditional PPO.
1 “HSA Taxes, FSA Taxes & How They Work in 2022-2023,” NerdWallet.com, 2023
2 “26 CFR 601.602: Tax forms and instructions, IRS, 2023
3 “Using a Flexible Spending Account (FSA),” HealthCare.gov, 2023
This article is intended to provide general information about insurance. It does not describe any Metropolitan Life Insurance company product or feature.
Nothing in these materials is intended to be, nor should be construed as, advice or a recommendation for a particular situation or individual. Participants should consult with their own advisors for such advice. Federal and state laws and regulations are subject to change.