how to invest


career, food, travel


saving, credit, debt


insurance, security


401K, IRA, FI, Retire

Home » Health, Health Insurance, HSA's

HDHP vs. PPO Costs, Savings, & Thoughts: 1 Year After the Switch

Last updated by on May 30, 2016

Last year, I noted that I had made the switch from a comfortable PPO health insurance plan to an HDHP plan (paired with an HSA), during my employer’s open enrollment.

Open enrollment is going on right now and I wanted to crunch some numbers to see how the switch played out over the course of the year, if it saved me money, and if I should continue or switch back to the comfortable plan.

To be fair, everyone’s personal circumstances (health, plans, prescriptions, family size) will vary, but I thought there might be value in me laying out how the move played out for me because I know a lot of young and relatively healthy folks are interested in this topic, and many have fear of moving from a PPO or HMO to a HDHP.

In a good year (one with few medical expenses), as I’ll highlight, it can pay off to make the move. Yes, shit happens, and if you do encounter a major medical procedure or service, that would obviously dramatically alter the numbers. Still, there are deductible and out of pocket maximums that are meant to help protect you when health issues arise (and eventually, they always do).

Here is the HDHP vs. PPO costs breakdown…

Premium Costs:

PPO vs HDHPPremium costs are deducted automatically from your paycheck, and you cannot use an HSA to pay for them. HDHP’s are generally cheaper than PPO or HMO plans, so most employer’s will charge you less for opting for them. That is what happened in my case:

  • PPO: $1,518 (out of pocket)
  • HDHP: $936 (out of pocket)

HSA Contributions:

You cannot make HSA contributions, unless you are on an HDHP plan. This was one of the big reasons why I decided to switch. When you leave an employer, you can take that HSA with you and use it to pay for medical expenses, regardless of whatever new plan you switch to. For this reason, I consider an HSA to be a huge bonus for anyone who entertains ideas of self-employment or retirement.

Due to my employer’s generous $1,600 contribution, plus a HDHP bonus incentive of $200 for each of us for going in for an annual physical, we received a total HSA contribution of $2,000 to pay for costs that I’ll highlight.

As mentioned previously, if you are employed, you cannot use your HSA to pay your health plan premiums, but you can use it on just about any other medical expense.

  • PPO: +$0
  • HDHP: +$2,000

Prescription Costs:

With my previous PPO, co-pays were just $10, regardless of generic or branded. In both 2011 and 2012, my wife and I each had one prescription. Most PPO’s cover a higher percentage of prescription costs than HDHP’s.

However, if your employer contributes to an HSA with your HDHP, then you can actually save money out of pocket. This played out for us this past year.

I also signed up for a prescription delivery service through my health insurer’s pharmacy that cut the costs, while also saving me monthly trips to a local pharmacy.

  • PPO: $240 (out of pocket)
  • HDHP: -$423.72 + $423.72 (HSA Contribution) = $0 (out of pocket)

Note: with women’s preventative coverage now including birth control generics via the Affordable Care Act, I expect prescription costs to decline to $169 next year, saving me $254 of HSA funds.

Costs for Services/Procedures/Products:

Over both years, we did not have many services or procedures, outside of an annual physical (covered 100% under both plans), flu shots (covered 100%), and blood work resulting from the physical. I did end up with a little issue where my health insurer would not pay the bill. By complaining, I saved $476 in overcharges and learned my CPT code lesson in the process. Still, I was left with $119 to pay, and my wife’s bill was $16.

I also had one urgent care visit and an associated prescription – total of $132.

The only other expense was my wife’s optician visit for a contact lens exam and order, for a cost of $216. In the past, this expense would have been out of pocket, but once again the HSA swoops in to the rescue.

  • PPO: $216 (out of pocket)
  • HDHP: -$483 + $483 (HSA Contribution) = $0 (out of pocket)

Total Out of Pocket & Final Results

After factoring in the cost of the plan and HSA contributions, modeled (PPO) and actual (HDHP) total out of pocket costs for the year were:

  • PPO: $1,974
  • HDHP: $936

So, I ended up saving $1,038 out of pocket. That number is boosted to $2,132 when you factor in leftover HSA contributions of $1,094 (which I can roll over to next year and apply to future medical expenses). And I hope to do the same next year. That’s a good start on the path to health insurance nirvana! So I’m sticking with the HDHP for the foreseeable future.

HDHP vs. PPO Discussion:

  • Have you made the switch from a PPO to an HDHP? How have you found the move?
  • Have you stuck with a PPO vs. an HDHP? Why?
  • Have you run similar calculations and what were the results?

Related Posts:

About the Author
I am G.E. Miller, & this is my story. My goal is financial independence ASAP. If you share that goal, join me & 10,000+ others by getting FREE email updates. You can also explore every post I have written, in order.

  • FatChance says:

    I switched to the HDHP last year. I got an $800 HSA contributiuon from the employer. I added $4000 via deductions. This year I get $800 plus I maxed out my contributions. My plan is to keep stuffing as much pretax money into the HSA as humanly possible to build up a health fund stash for when I retire.

    Health care benefits are one of the biggest reasons I feel the need to stay employed. If I had $30,000 in an HSA when I leave the workforce, I think that would ease my fears greatly.

  • Yero says:

    Wow, so your employer put $2,000 into your HSA even though your HSA premiums totalled the lower $936? Nice.

    I had an HDHP + HSA with my old employer. When I left, I did keep my HSA, but now I am responsible for the $12/quarter maintenance fee Fidelity charges. When I was still with that employer, that fee was either waived, or paid by my employer (I don’t recall). I’m still saving money by paying medical expenses with this pre-tax HSA money, but the fee is something to consider if your HSA has a low balance and you expect to leave this job.

    • G.E. Miller says:

      Yeah. I have a good setup. Surprisingly few of my colleagues are taking advantage of it though.

      You are correct about hefty maintenance fees with HSA’s. Has anyone found a low cost HSA for after they left their employer?

      • Andrew says:

        I haven’t left but I was informed that my HSA earns interest so once I reach a certain threshold the fees would be offset by the earnings.

      • Christy M says:

        Using an HDHP is much easier through an employer. As a self-employed person, I used Chase’s HSA, which was either $1 or $2/month. In 2012 that was the best I could find.

        There are also a few credit unions that offer good deals on HSA’s, but also be sure to look at fees such as account opening or closing fees (Chase had none).

  • Jessica says:

    ok, i asked about this the other day and never heard anything. not sure if you received it. do you still use ooma for your phone? we are debating buying it. i saw you reviewed it but it was awhile ago. what are your thoughts? thanks

  • Ornella @ Moneylicious says:

    Great analysis of your health care options. You also have an awesome employer!

  • Andy says:

    Does anyone have experience with Health Savings Administrators ( They offer about two dozen Vanguard funds. Their fees are $45 per year, which doesn’t sound that great. However, with a free debit card and the very low-fees associated with the Vanguard funds, that $45 starts to sound pretty good. I don’t have personal experience with them, but I’ve heard good things.

  • Mary Kaplan says:

    We own our own business so we have private insurance. We switched to a very high deductible several years ago to save out of pocket insurance costs. So far so good, but we’re not getting any younger. I had surgery earlier this year and we were able to use our HSA to pay. This was the first time we ever had to tap into our HSA. I’d say, our experience to date is good, and we haven’t been tempted to switch to a lower deductible.

  • Tim says:

    I also made the switch in the last year and because I only went in for a covered physical my calculations were fairly simple. I saved $291 in principal, I had zero prescriptions, co-pays, or healthcare costs. My company contributed $750 to my HSA.Basically I saved $1041 this year by using a HDHP and HSA. I did have Lasik performed and was able to contribute enough extra in my HSA to cover the entire procedure. Being 28, active, and healthy with no required prescriptions, This plan is a no brainer! This year I have no planned health care expenses and will be maxing out my HSA to benefit from the tax incentives and bank funds for future expenses. With a $1500 deductible and $4000 max out of pocket, I know I can cover that if there were any catastrophic medical expenses.

  • Sarah says:

    We’ve had good luck with an HMO plan, since there are plenty of in-network doctors and hospitals in the area. The employee contribution is only $50 more per month than the high deductible plan… and there’s no deductible, so we literally paid NOTHING out-of-pocket when my husband had an emergency appendectomy last spring. With the HDHP plan, we would have been out $4,000.

    While we cannot get an HSA with this plan, we did put about $300 in an FSA this past year… which turned out to be a pretty close estimate of our total out-of-pocket expenses. If the money rolled over, we definitely would have contributed more.

  • Jonathan says:

    I just elected to switch a week ago during open enrollment. The HDHP plan was $226/mo cheaper than the regular PPO plan and my employer kicks in $1,700. On top of that I am having them hold $395/mo to go to my HSA and max it out. I read through the Wells Fargo info whom handles te HSA and it said that if you hold over a certain balance when you leave the maintenance fee was waived.

  • Jack Perry says:

    People worried about the fees associated with health savings accounts should definitely do their homework and explore their options. I have an HSA with a credit union which charges me no fees, and pays a higher rate of interest than most savings accounts associated with banks.

    I was lucky to have joined that credit union when I had the chance; I’ve been a member of several credit unions, and only that one offered such a nice deal. I can’t compare it to other accounts, but if you see an annual fee of $45, keep in mind that you’d better be making at least that much in interest ever year.

  • Chris in Boston says:

    Another big plus with HDHP plans. Most plans also pay 100% (no copay or deductible) for ‘maintenance’ medications.

    This alone saved me over $1,300 a year. The two drugs I take daily are on the maintenance medication list. Drugs on that list are covered 100% when you have an HDHP. My old PPO plan required a copay to be paid until I hit my out of pocket limit for the year.

    HDHP plans + HSA do save money!

    • C Venda says:

      I would definitely look for this tidbit of information next time, but it can be hard to get info until you’re actually using the plan. My old HDHP did not cover maintenance meds for free.

      Instead, prescription costs were the biggest blow to me in trying an HDHP. Realize that the prescription “in network” costs are NOT the copays you pay – instead you’ll pay slightly discounted retail rates for months. So a $498/month antidepressant is not $50 or $75/month but $470 a month until you meet your deductible. No mail order discount, and my deductible was $2600.

      So comparing my options and costs turned out way different than I expected. I was paying $200-300 a month premiums for the HDHP plus $500 a month prescription costs until I met the deductible (which is based on in-network “reasonable” costs, right?). So it was like $800 a month for an HDHP vs. full coverage at $500 a month in a PPO! At that rate it would take almost a year to get to where I would be paying only $390 a month….

      My conclusion is that unless your employer is generous (aka incentivizing) and contributes a lot to your HSA to cover those shockers, you need to be either super healthy with very low monthly costs or extremely unhealthy but where the HDHP covers at 90-100% after the deductible.

      Just be ready for a

  • Ruth says:

    I’m strongly considering an HSA. I recently purchased a plan that has a high deductible ($5000) — but it is a PPO. Does that make it an HDHP? Or does it have to be called specifically an HDHP?

  • Delru says:

    If you or your spouse are enrolled in VA medical benefits, you are NOT eligible for HSA. If you are ELIGIBLE for VA benefits, but have not used them for 3 months, you can participate in HSA. If you do use your VA benefits, you are not eligible to participate in the HSA for 3 months thereafter, and have to tennis-ball back & forth with your employer. One has to dig for this info, as all the HSA rah-rah sites carefully side-step this issue and don’t address it straight on.

    Also, there is a lot of talk about the lower premium costs with HSA vs PPO, but no “bottom-line” data about the tax savings. These are pre-tax dollars. An HSA will give you a low pre-tax savings of…say…$1,500 annually (if your premium is $126 per mo). A PPO will give you a pre-tax savings of $9,000 (if your premium is $750 per mo). Any comparison charts out there for this difference? No.
    A PPO out-of-pocket is about $3,000 for family. A HSA is $5,000. That’s a $2,000 savings, not counting the pre-tax savings.

    Remember…just 1 car accident, just 1 hospital stay…what happens with newly enrolled HSA participants and you have only $500 in your account? Sorry, I am wary of HSA because your insurance coverage is only as good as your bank account balance. After all, why does one have insurance at all? Because you never know when a big event will happen. If we all just had small events, we wouldn’t even need insurance.

    • Chris in Boston says:

      This comment makes no sense: “Sorry, I am wary of HSA because your insurance coverage is only as good as your bank account balance.”

      Your insurance coverage is not limited by your HSA at all. Your HDHP coverage is completely separate from your HSA.

      Last year I had $97,000+ in medical expenses. My HDHP plan for Single+Spouse has a $4,400 out of pocket maximum limit. $2,400 deductible. My HDHP covered everything in full after the $4,400 was paid.

      The first $2,400 is paid 100% out of pocket. Once I reach that my HDHP plan pays out a bit of the costs, until I max the Out of Pocket. Once I hit $4,400 out of pocket, the HDHP plan paid out 100% of all claims. I used my HSA to cover the $4,400 which was all Qualified Medical Expenses. So that $4,400 was paid with pretax money. Saving me an additional 33% based on my current tax situation.

      Not really understanding why you feel that your insurance is somehow limited by your HSA balance.

  • Nancy says:

    Has anyone used State Farm or Vanguard for your HSA? If so what is your opinion?


Enter your:

Home | Sitemap | Terms | ©