PPO vs. HDHP: what’s the difference?

HealthMarkets fills you in on these 2 popular types of plans — and which one might be right for you.

Shopping for health insurance during the Open Enrollment Period can be stressful. You have to predict how much insurance you think you’ll need in the coming year. And that might not be so easy to do, since you can’t know the future.

Plus, you have to figure out what all those acronyms mean before buying anything. Two that you’re likely to come across are “PPO” and “HDHP.”

What do PPO and HDHP mean?

A PPO stands for “Preferred Provider Organization.” That means your insurance plan is built on relationships with preselected, or preferred, medical providers. PPOs do not stop you from going to the doctor of your choice, but they cost less if you stick to the preapproved network.

HDHP stands for “High-Deductible Health Plan.” This is a type of plan that has a higher deductible than a other comprehensive insurance plans. (A deductible is the amount you have to pay for covered services before your insurance shares the cost with you.) In exchange for a high deductible, you’ll pay a lower premium and have access to a Health Savings Account (HSA). (We’ll talk more about HSAs below.)

Let’s take a closer look at the differences between PPOs and HDHPs, weighing the pros and cons of each. Plus, we’ll look at which one (or both) might be a fit for you.

If you need help finding an insurance plan, call a licensed insurance agent at (800) 827-9990 to discuss available plans, or browse your options online today.

Preferred Provider Organization: pros and cons

When you’re looking at a health insurance plan with a PPO, you’ll first want to look at the list of in-network providers. These are the doctors, clinics and hospitals that have negotiated rates with your insurer. If you have to see an out-of-network provider, you can still visit them and have coverage, but your insurer will pass more of the cost on to you.

As with any plan, PPOs come with trade-offs.

Pros: PPOs typically make it easy to get the care you want, says Adria Gross. She’s a health insurance advocate and CEO of MedWise Insurance Advocacy in Monroe, New York.

For instance, they allow you to see specialists without a referral. As long as you stay within the plan’s network, you can access a wide range of health services. That often makes PPOs good for people who are managing health conditions, such as cancer or heart disease, that require frequent or specialized medical care.

Cons: Compared to plans such as HMOs (Health Maintenance Organizations), PPOs often have higher premiums and out-of-pocket costs. (HMOs normally limit coverage to providers, and clinics and hospitals in their network, and they don’t cover out-of-network providers or services outside of emergencies.)

High-Deductible Health Plan: pros and cons

First, you’re probably wondering what counts as a high deductible. Here’s how it looks for 2024:

An HDHP plan has a deductible of:

• At least $1,600 for an individual
• At least $3,200 for a family

One upside is that HDHP plans limit your maximum out-of-pocket expenses. Per year, it can’t cost more than:

• $8,050 for an individual
• $16,100 for a family

Pros: HDHP plans have lower monthly bills (premiums). So, if you’re in good health, they might save you money. “Choose an HDHP if you want lower monthly premiums, are generally young and healthy, and can afford higher out-of-pocket costs,” says Michael Orefice. He’s the senior vice president of operations at SmartFinancial.com in Newport Beach, California.

In addition, HDHP plans offer you the option to open an HSA. That’s a type of health account that you can contribute pretax dollars to. You can use the funds to pay for medical bills that accrue during the year, or you can hold onto the money for the future. The money earns interest and rolls over every year. It can be a great way to save money for the future, when your medical expenses are likely to be higher.

For 2024, you can put up to $4,150 in an individual HSA, or $8,300 in a family HSA.

Cons: If you have a medical emergency or develop a chronic condition, such as cancer or type 2 diabetes, you may end up shouldering large medical bills that you’ll have to pay out of pocket, says Gross.

You’ll want to read your plan’s brochure closely to make sure you’re comfortable with the coverage and out-of-pocket expenses.

You can always call a licensed insurance agent at (800) 827-9990 to have them walk you through a plan, or do your own research by browsing plans online.

PPO vs. HDHP: another way to look at your plan

Regardless of whether you choose a PPO or HDHP, you need to consider the tier or category they’re in. All Affordable Care Act (ACA) plans come in 1 of 4 “metal” options: bronze, silver, gold or platinum. Here’s how they break down:

• Bronze plans provide the lowest monthly bills but have the highest out-of-pocket fees. They typically cover about 60% of essential health care costs. “Bronze plans are a good choice for individuals who are generally healthy and don’t expect to use health care services frequently,” says Orefice.
• Silver plans cover around 70% of essential health care costs. They have moderate monthly bills and out-of-pocket costs.
• Gold plans have higher monthly bills but cover about 80% of essential health care costs. “They are suitable for individuals who anticipate using health care services more frequently or have ongoing medical needs,” says Orefice.
• Platinum plans have the highest monthly bills but offer the most comprehensive coverage. They usually cover about 90% of essential health care costs. This plan is best only if you anticipate having significant medical expenses, says Orefice.

PPO vs. HDHP: which plan is best for you?

There’s no perfect plan for everybody. But both Orefice and Gross agree on the following:

• HDHP plans are great if you want lower monthly bills, are generally young and healthy, and can afford higher out-of-pocket costs. They are also useful if you want to take advantage of an HSA. Just keep in mind that you’ll need to put pretax dollars into it.
• PPOs work well if you anticipate using your coverage more often or seeing out-of-network providers. They’re also beneficial if you’re willing to pay higher monthly bills for lower out-of-pocket costs, or if you want the flexibility to see who you want, when you want. (Remember: PPOs still offer some coverage for out-of-network providers.)

Once you find a plan you like, it could serve you well for many years to come. And if you still need help making up your mind, you can speak with a licensed insurance agent by calling (800) 827-9990, or browse your options online.