Choosing an HDHP versus a PPO/Traditional Health Plan

During open enrollment, your health plan is a big factor when you are making decisions. A big change in health plan trends that has come up is that employers are offering their employees health plan options. Does your employer offer different options for your health plan? If they do, consider these four factors when choosing between an HDHP (a high-deductible health plan) or a PPO (preferred provider organization).

 

Family and Personal Expenses

During open enrollment, table or charts may show up on your available plans’ premiums, deductibles, and/or out-of-pocket responsibility. Once you have those numbers, you can compare them with your family costs from things like doctor visits and/or prescriptions. This is the critical first step when weighing your health plan options.

If you don’t think you or your family will need a lot of medical care in the foreseeable future, participation in an HDHP plan makes the most sense. You will save money by paying less in premiums.

Pre-Tax Benefits Savings

Pre-tax employee benefits plans, such as a health savings account or a flexible spending account, let you save money by putting it aside to pay for eligible expenses. These expenses can deal with medical, dental, vision and more. The unspent fund will roll over year after year, which allows you to build tax-free savings for your future.

If you want to take advantage of the savings and investment potential of an HAS, you have to be enrolled in an HDHP. If you have both an HDHP and an HAS, you can pair them with a limited FSA for even more savings.

Employer Contributions

Wouldn’t it be nice to earn free money? Employers can contribute to their employees’ HSAs! These contributions will help you cover the cost if you have a higher deductible when you choose an HDHP versus a PPO.

Planning for Retirement

During the first six years of retirement, the biggest reason that household expenses increase is because of healthcare costs. If you feel an HDHP is right for you, then an HAS can be part of your retirement planning-strategy. All HAS funds carry over year to year so the funds that you don’t spend can be used later in life. The investment capability of these accounts rivals a 401 (k) or an IRA, meaning you get to grow your funds even faster than simply using interest. Once you turn 65 years old, HAS funds can be spent an ineligible expense without getting a tax penalty.

 

Do you want to compare an HDHP versus PPO or other type of health plan? Use this Calculator to calculate the differences! https://www.wexinc.com/insights/benefits-toolkit/hdhp-hsa-vs-traditional-health-plan/