When you are trying to find the best health insurance it is difficult to understand all that abbreviations and what they mean. Maybe you are trying to figure out what is HDHP, or PPO, or even HSA. We are going to help you.
HSA vs. PPO is the main subject of this article. What’s better, a health savings account, HSA, or a preferred provider organization, PPO. We are going to list all of the pros and cons, and after you finish reading this article you will be able to decide which healthcare plan is better for you.
What is an HSA?
HAS is basically a savings account, and it is designed to cover your eligible medical expenses. Even some services that your health insurance plan is not covering. The main reason why you should consider this plan are tax reasons that are contributing to your health savings account.
- If you want, you can make tax-free withdrawals for medical expenses whenever you want.
- Dividends, capital gains or any other interest your account earns are tax-free.
- Your taxable income is reduced because your contributions are taken from your paycheck before it’s taxed.
But besides everything, you need to know that HSA is not a health insurance plan. If you want to an HSA, you need to have HDHP, an eligible high deductible health plan.
So, what you really need to know is whether you want to have an HDHP. We are now going to explore the possibilities that HDHP has alongside with HSA.
What is an HDHP?
An HDHP must have a minimum deductible of $1,350 and a maximum cost of 6,650 for single coverage, and that’s for 2018, according to the IRS. And for family coverage, the deductible minimum is $2,700, and the maximum is $13,300.
You may wonder what a deductible is? It’s the amount you need to pay for covered health expenses before an insurance company starts to cover its share for non-preventive health services. It may be really high, but the monthly premiums are much lower than other types of health insurance plans out there.
And the most important thing is if you have an HDHP you can then open an HSA account. The best part is that if you are not using your HSA funds, they are growing.
Some of the medical specifics that are covered are decided by your insurance carrier or employer-provided plan, but some of them are covered by HSA:
- Artificial limbs
- Blood sugar test kits for diabetics
- Birth control treatment
- Doctor’s office visits
- Drug prescriptions
- Surgery, but not cosmetic
- Walkers, wheelchairs, and canes
There’s a possibility that your employer will offer you an HSA account plan, but only if you have an eligible HDHP.
But this is not the best option for everyone, and if it isn’t for you, you may want to consider some other options.
What is a PPO?
PPO is a preferred provider organization plan. And it gives you access to some healthcare providers and medical facilities at much lower prices. The con for this plan it that out-of-pocket costs are high, and it depends on the insurance company. And the PPO premiums can rise very high.
But PPO still can be flexible. When you compare PPO with some other plans, you can see that for example, you don’t need a referral from your primary care physician to see a specialist, and the cost for the visit is smaller than with some other plans. The good thing is that PPO can cover some extends that some other health insurance can’t, like acupuncture, but it again depends on your carrier.
The problem gets when you are not home, and you get sick. There are insurance plans that won’t cover services you get out of the network. PPO can cover some costs, but most of the bill you’ll need to pay.
Do you need to get an HDHP with an HSA?
Is this plan the best for you? Well, it is if you are young and healthy. If you don’t get sick often, and you don’t visit the doctor that often. The premiums are low, and they can be diverted into premium savings with the HSA account. You’ll always have an emergency fund for medical expenses when you need them. But if you don’t spend it, it will stay there still.
What you need to know is that you need a large amount of money, before your insurance kicks in, in case you need medical services. You need to be able to afford deductibles within 30 days of receiving emergency medical services.
Do you need to get a PPO?
If your visits to the doctor are often, or you need a continuous medication, this type of plan is the best for you. The deductibles are lower than HDHP. If you are not traveling a lot, and you need medical care frequently, this is a better option for you than HDHP. But even if you are traveling, some out-of-network services are covered, but everything depends on your insurance company.
PPO cover 100% of preventive services when they are provided in-network, like blood pressure screening, alcohol misuse screening and counseling, immunization vaccines and HIV screening. And all of these preventive services are provided by HDHP too.
HSA vs. PPO: The Verdict
HDHP is good for you if you don’t need much medical attention, it has low premiums and you can get an HSA with it, where you can save for some medical procedures. If you go to the doctors a lot, you have a chronic condition, and you need prescriptions, then a PPO plan is better for you. Be sure to choose the one with a low deductible.
What more you need to know when you are choosing a health insurance plan
- Be sure to pay attention to deductibles, coinsurance, and copayments.
- Always think about your medical needs and compare the services you need and the cost with the plans you are considering.
- If you want a savings account, you need to know that HSA isn’t the only one, there is FSA, where you don’t need to have HDHP.