Guides · Behavioral wealth & protection
Health Insurance HDHP vs. PPO
Open enrolment asks you to bet on your own health for the coming year, using a form that makes the two options look like different amounts of the same thing. They aren't — one of them comes with the best-taxed account in the US code attached.
Compare totals, not premiums
A PPO charges more every month and asks for less when you use it. An HDHP charges less every month and asks for more. Neither is cheaper in general — which one wins depends entirely on how much care you actually use.
The comparison that answers it is total annual cost: twelve months of premiums, plus what you would pay out of pocket at your realistic level of usage, minus anything your employer contributes to an HSA. Run it twice, once for a quiet year and once for a bad one.
The bad-year number is the one that matters most, because it is the risk you are taking on. Every plan has an out-of-pocket maximum — an absolute ceiling on what you can be charged for in-network covered care in a year — and that ceiling, not the deductible, is the real worst case you should be comparing.
Annual premiums + out-of-pocket at your usage − employer HSA contribution. Then check the out-of-pocket maximum for the bad year.
The account only one of these plans unlocks
An HSA is taxed better than any other account available to an ordinary person. Contributions are deductible, growth is untaxed, and withdrawals for qualified medical expenses are untaxed — three exemptions where a 401(k) or Roth IRA gets two.
You can only contribute while covered by a qualifying high-deductible health plan, and the IRS sets the floor a plan's deductible must clear to qualify. That threshold is re-indexed for inflation each year, so a plan that qualified last year is not automatically a qualifying plan this year.
The part people miss is that an HSA does not have to be spent. There is no deadline, no use-it-or-lose-it rule, and the balance can be invested rather than left in cash. Paying current medical costs out of pocket and leaving the HSA to compound turns it into a retirement account with better tax treatment than your actual retirement account.
An HDHP trades predictable premiums for a lower fixed cost and a larger worst case, and it is the only plan that makes you eligible to fund an HSA. Compare total annual cost at your realistic usage, not the monthly premium.