It's not easy navigating the maze of health-care insurance plans or figuring out the one that best suits your needs. A high-deductible health-care plan, or HDHP, and a preferred provider organization, PPO, are on opposite ends of the health-care plan spectrum. Your choice depends on your overall health and your pocketbook.
High Deductible Health Plans
The name of the plan says it all: You pay a high deductible for coverage. However, your premiums are low. You'll pay for routine care entirely out of pocket until meeting your annual deductible. For 2014, the Internal Revenue Service defines an HDHP as a plan with an annual deductible of not less than $1,250 for a covered individual and $2,500 for a family. Annual out of pocket expenses, which include co-payments, deductibles and other medical fees -- not including premiums -- can't exceed $6,350 for individual coverage and $12,700 for a family plan.
Preferred Provider Organizations
If you enroll in a PPO, you won't need referrals from your primary care physician to see specialists. While you receive care from a network of physicians and medical facilities, if necessary you can go outside of that network. When you do, you pay for the privilege, as your insurance company will not cover as much of the cost. Most PPOs have annual deductibles, but they are considerably less than HDHP policies.
Health Savings Accounts
If you're considering an HDHP but worry about paying the costs of routine medical care up to your deductible, it's likely your company offers a health savings account, or HSA, which can help offset some of these expenses. These tax-advantaged accounts allow you to make contributions up to a certain annual amount. Your withdrawals are tax free as long as payments go toward medical expenses. If you're purchasing health insurance on your own, you can also find an HDHP with HSA benefits. For 2014, the maximum annual HSA contribution is $3,300 for an individual and $6,550 for family coverage.
Making a Decision
Whether the HDHP or the PPO is the best plan for you depends on your individual circumstances. If you're relatively healthy, the HDHP in combination with an HSA can save you a significant amount of money in premiums. If you have underlying health problems, or it's important that you can choose your doctors and treatment facilities, the PPO might be a better choice. If you receive regular treatment from a dermatologist, allergist or other specialist, or if you're thinking about starting a family, take those needs into consideration.
- Healthcare: High Deductible Health Plan (HDHP)
- California Department of Managed Healthcare: PPO and POS Plans
- Blue Cross Blue Shield of Illinois: Types of Health Insurance Plans
- United Healthcare: Traditional
- Office of Personnel Management: Understanding High Deductible Health Plans and the Role of Health Savings Accounts Health Reimbursement Arrangements
- Internal Revenue Service: Rev. Proc. 2013-25
- Blue Cross Blue Shield of Illinois: All About Health Savings Accounts (HSAs)
A graduate of New York University, Jane Meggitt's work has appeared in dozens of publications, including Sapling, Zack's, Financial Advisor, nj.com, LegalZoom and The Nest.