HDHP vs. PPO: Which Plan Should I Choose

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If you're shopping around for a health insurance plan, there are several options to consider. High-deductible health plans (HDHPs) and preferred provider organizations (PPOs) are two common types of plans that you may want to explore. In 2023, nearly half of U.S. employees were covered by PPO plans, while about 30% were enrolled in HDHPs.

Both types of plans have pros and cons, but the best choice for you will depend on factors such as your healthcare needs and budget.

What is HDHP insurance?

HDHPs offer high deductibles in exchange for lower premiums. To qualify as an HDHP, a plan must meet the minimum deductible and maximum out-of-pocket limits set by the federal government.

For example, in 2025, an HDHP must have an annual minimum deductible of $1,650 for individual coverage or $3,300 for family coverage. The yearly out-of-pocket costs (including deductibles, copays, and coinsurance) can't exceed $8,300 for an individual or $16,600 for a family. However, many HDHPs set their deductibles much higher than the minimum - sometimes as high as the maximum out-of-pocket costs.

Like most health plans, HDHPs cover certain in-network preventive care services even if you haven't met your deductible. But what's covered may depend on your age and health risks. Some examples of preventive services that are typically covered by HDHPs are:

• Mammograms for breast cancer screening

• Blood pressure checks

• Depression screenings

• Obesity screenings and counseling

HDHPs can come in various forms, including health maintenance organization (HMO), point of service (POS), and exclusive provider organization (EPO) plans. This means the network flexibility for an HDHP depends on the plan structure. Some HDHPs have a network of healthcare professionals and facilities but allow you to go out of network, sometimes at a higher cost. Others might only cover in-network medical care, except in emergencies.

What is PPO insurance?

PPOs are popular health insurance plans that typically offer lower deductibles than HDHPS but often have higher monthly premiums.

Unlike HDHPs, PPOs don't have federally mandated minimum deductibles. However, they must comply with out-of-pocket maximums - the most enrollees can pay for covered services in a year - set by the Affordable Care Act (ACA). For 2025, these out-of-pocket maximums are $9,200 for an individual and $18,400 for a family. These maximums apply to in-network essential health benefits. Certain older plans and those exempt from ACA regulations don't have to comply with these out-of-pocket maximums.

PPOs, like HDHPs, cover preventive care services (usually at no out-of-pocket cost) even before you meet your deductible. These services are similar to those covered by HDHPs and include annual checkups, vaccinations, and various health screenings.

What's the difference between HDHP and PPO plans?

To help you better understand the difference between HDHP and PPO plans, here's a chart comparing key features of these two health insurance options.

Pros and cons of a high-deductible health plan

If you have enough money saved to cover unexpected medical expenses, an HDHP could be a good choice for you. Here are a few advantages of an HDHP:

• Pairing with an health savings account (HSA): You can only contribute to an HSA during the months you were enrolled in a qualified HDHP. An HSA is a triple-tax-advantaged account that allows for pretax contributions, tax-free earnings growth, and tax-free withdrawals for qualified medical expenses. Unused HSA funds can be rolled over annually to help cover future healthcare expenses.

• Paying lower monthly premiums: In 2023, employees with individual HDHP coverage paired with an HSA paid an average monthly premium of $640.

• Receiving employer contributions to your HSA: On average, employers contribute around $660 to individual HSAs and $1,200 to family HSAs annually.

While enrolling in an HDHP can reduce your monthly premiums, it's important to be aware of the potential drawbacks, such as:

• Paying higher out-of-pocket costs: Because HDHPs typically have lower monthly premiums but higher deductibles, you'll likely pay more upfront for medical care before your insurance starts covering the costs.

• Delaying necessary care: You may be tempted to postpone or not seek out medical care because of the high out-of-pocket costs, which can lead to more serious and expensive health problems in the future.

• Facing potential financial risk: If you experience an unexpected illness or injury, you could be responsible for paying thousands of dollars out of pocket before your insurance kicks in.

Pros and cons of a preferred provider organization plan

A PPO might make more sense if you have ongoing health issues and need frequent medical care. Here are a few benefits of a PPO:

• Having a lower deductible: A PPO plan will start covering your medical expenses sooner than an HDHP since the deductible is lower.

• Not needing referrals to see specialists: You can visit any specialist without needing a referral from your primary care physician.

• Receiving coverage for out-of-network care: Generally, a PPO will allow for more flexibility with out-of-network care. But if you go out of network, you'll likely pay more and you may be subject to balance billing.

However, it's important to consider these potential disadvantages before choosing a PPO plan:

• Paying higher monthly premiums: In 2023, the average monthly premium for employees with individual PPO plans was $742.

• Not having access to an HSA: With a PPO plan, you don't have access to an HSA. You can contribute to a flexible spending account (FSA) if your employer offers it. But you'll need to spend the money before the deadline or you'll lose any remaining funds.

• Having a separate deductible for out-of-network care: PPO plans often have a separate, higher deductible for out-of-network care. This means paying higher out-of-pocket costs if you receive care outside your plan's network.

Which insurance plan is better for me?

Choosing between an HDHP and a PPO depends on your health needs and financial situation.

Let's say you're deciding between the following HDHP and PPO plans:

• An HDHP with an annual premium of $4,800 ($400 per month) and $5,500 deductible

• A PPO with an annual premium of $7,200 ($600 per month) and a $1,200 deductible

Now, consider the scenarios outlined in the chart below.

This shows that an HDHP can be more cost-effective if you don't need much medical care during the year. However, if you have significant medical expenses, a PPO might save you money despite its higher premiums.

Questions to ask yourself when choosing between an HDHP and a PPO

When choosing between an HDHP and a PPO, consider the following questions:

• How much can I afford to pay in monthly premiums?

• Can I afford to pay a higher deductible if I need unplanned medical care?

• Will my current medical team be in network?

• Do I want the flexibility to go out of network?

• How often do I expect to need medical care?

• Do I have any planned medical procedures coming up?

• Do I have access to an HSA or FSA, and does my employer contribute to either account?

Answering these questions can help you understand which plan better fits your situation. If you're still unsure, consider talking to your company's human resource representative or a licensed insurance agent.

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