HDHP vs PPO: Which Health Plan Costs Less?

A high-deductible health plan (HDHP) has lower premiums but higher costs when you get care. A PPO costs more each month but less when you use it. The cheaper plan depends on how much care you expect, and on the tax value of a health savings account (HSA).

A worked example

Compare two hypothetical employer plans:

Plan feature	HDHP	PPO
Monthly premium	$120	$340
Deductible	$3,500	$1,000
Coinsurance after deductible	20%	10%
Out-of-pocket maximum	$7,000	$4,000
HSA	$4,000 contributed, 30% tax rate, $750 from employer	Not eligible

Total yearly cost, after HSA tax savings and the employer contribution:

Medical spending in a year	HDHP	PPO
$500	About $0	$4,580
$4,000	$3,090	$5,380
$15,000	$5,290	$6,480
$40,000	$6,490	$8,080

In this example the HDHP is cheaper at every level of spending. The $2,640 premium difference plus the HSA benefits outweigh the higher deductible, even in an expensive year.

Compare your own plans with the HDHP vs PPO calculator.

When a PPO can win

• The premium gap is small.
• You can't afford to contribute to the HSA, so you lose its tax savings.
• You can't comfortably cover the HDHP's deductible if something happens early in the year.
• Your doctors are only in the PPO's network.

Look at the worst case too: here the HDHP caps at about $6,490 and the PPO at about $8,080. Make sure you could handle the higher of the two.

Source: Healthcare.gov: HDHP.