Texas hdhp vs ppo calculator

What the two plans actually differ on

Not quality of care. The difference is where the money sits.

A high-deductible health plan charges a lower premium and asks you to pay more of your own care before cover starts. To qualify as an HDHP the plan has to meet a minimum deductible set by the IRS each year, and qualifying is what lets you open a Health Savings Account.

A PPO charges a higher premium, starts covering care sooner, and cannot be paired with an HSA. Some plans allow a flexible spending account instead, which is a different and much weaker thing, because FSA money generally does not roll over.

So the trade is a certain cost against an uncertain one. Premiums are known in advance and unavoidable. Deductibles are only paid if you need care. The calculator prices both sides for a year of spending you specify.

How the calculator works out each plan

For each plan it adds twelve months of premiums to the cost of your care. Below the deductible you pay everything. Above it, coinsurance applies until you reach the out-of-pocket maximum, and the tool assumes coinsurance of 20%.

On the HDHP side it then subtracts two things: any employer HSA contribution, which is money you would not otherwise have, and the income tax saved by routing your medical spending through the HSA, computed at the marginal rate you enter.

That final line is the one people leave out when comparing plans on a benefits portal, and it is often large enough to reverse the ranking.

A worked example, using the tool’s defaults

The calculator opens with an HDHP at $95 a month with a $3,200 deductible and a $6,000 out-of-pocket maximum, plus $750 of employer HSA money. Against it, a PPO at $260 a month with a $1,000 deductible and a $4,000 maximum. Expected medical spending is $2,500 and the marginal tax rate is 24%.

The HDHP costs $2,130 less over the year. Note where that comes from: the PPO actually covers the care better, paying all but $1,300 of the $2,500, while the HDHP leaves the whole $2,500 with you because it sits under the deductible. The HDHP wins entirely on the $1,980 premium difference plus $1,350 of employer and tax money.

That is the usual shape of this comparison. The HDHP is not covering more. It is charging less up front and handing back the difference in tax treatment.

The three tax breaks in an HSA

An HSA is the only account in the US tax code with three separate breaks:

• Contributions are deductible going in, and when made through payroll they also avoid Social Security and Medicare tax.
• Growth inside the account is untaxed.
• Withdrawals are untaxed when used for qualifying medical costs.

Every other tax-advantaged account gives you two of those at most. Contribution limits are set by the IRS each year and Publication 969 carries the current figures and the rules on who is eligible.

Held long enough, an HSA works as a retirement account. There is no requirement to spend it in the year you contribute, unspent balances roll over indefinitely, and many providers let you invest the balance rather than leave it in cash. That is a different strategy from using it as a spending account, and it only works if you can afford to pay medical costs from ordinary money in the meantime. The general account comparison is in the investing section.

What happens in a bad year?

This is the question the exercise exists for, and running it once at your expected spending misses it entirely.

Run the calculator again with medical spending set high enough to hit both plans’ out-of-pocket maximums. Using the defaults, the HDHP costs $1,140 of premiums plus a $6,000 maximum, less $750 of employer money and $768 of tax saved, which is $5,622. The PPO costs $3,120 of premiums plus a $4,000 maximum, which is $7,120. The HDHP is still ahead, by about $1,500.

That result is specific to those numbers. Change the premium gap or remove the employer contribution and it flips. The point is that the worst case is what insurance is actually for, and the plan you choose should be one you could survive a bad year on, not only the one that is cheapest in an average year.

Ask yourself whether you could pay the full deductible next month if you had to. If the answer is no and the HSA balance is not there yet, the cheaper plan on paper is the riskier plan in practice.

Who is an HDHP wrong for?

The comparison on this page assumes you could absorb the deductible if the year went badly. Where that assumption fails, the cheaper plan on paper is the wrong plan.

Four situations come up repeatedly.

• No cash to cover the deductible. If a $3,200 bill in March would go on a credit card, the premium saving is being borrowed back at card rates. Build the buffer first, or take the lower deductible while you do.
• Care you already know is coming. A planned surgery, a pregnancy, an expensive maintenance drug or a condition that puts you near the out-of-pocket maximum most years removes the low-spending case the HDHP wins on. Run both plans at the maximum and see whether the premium gap still covers it.
• No employer contribution and a narrow premium gap. The HDHP in the default example wins on $1,980 of premiums plus $1,350 of employer and tax money. Take away either and the result can reverse.
• Ineligibility for the HSA. Being claimed as someone else’s dependant, being enrolled in Medicare, or holding other cover that is not a qualifying high-deductible plan can each disqualify you, and a general-purpose flexible spending account, including a spouse’s, can do the same. Without the HSA the plan is a high deductible with a low premium, and half the case for it is gone. Publication 969 sets out the eligibility rules.

Deferring care because the deductible is unmet is a real cost as well, and it appears nowhere in the arithmetic above.

Is the 20% coinsurance figure really yours?

Probably not exactly. Twenty per cent is a common coinsurance share and it is what this calculator assumes above the deductible for both plans, but it is an assumption rather than a measurement.

Your summary of benefits gives the real figure, and it varies a lot. Plans use 10%, 20%, 30% or a flat copay per visit, and the share often differs by service type: one rate for a specialist, another for imaging, another for a hospital stay. Where your plan’s coinsurance is materially different from 20%, the middle band of this comparison, between the deductible and the maximum, will be off.

Two figures are exact regardless: the premiums, and the out-of-pocket maximum. If the plans rank the same way at both ends, the coinsurance assumption in the middle does not change your decision.

What this comparison cannot see

The arithmetic is the easy part. What it misses is often decisive.

• Networks. Whether your doctors and your hospital are in network decides more than the deductible does. An out-of-network specialist can cost more than the entire premium difference. Check the provider directory for both plans before you compare anything.
• Prescription cover. Drug formularies differ between plans at the same employer, and a single specialty medication can outweigh everything on this page.
• Family versus individual deductibles. Family plans can use an aggregate deductible, where one person’s costs count toward the whole family total, or embedded individual limits. The mechanics change the maths materially.
• Care you cannot predict. A pregnancy, a planned surgery or a chronic condition make expected spending knowable. Most other years are guesses.
• Employer specifics. Whether the HSA contribution arrives up front or per pay period, and what happens if you leave mid-year.

This tool is general information about how the costs compare, not advice about which plan to enrol in. The full limits are in the disclaimer, and how we compute things is in the methodology.

The mistakes people make at open enrolment

Comparing premiums only. The cheapest premium is the point of an HDHP. Comparing on that alone guarantees you pick it, correctly or not.

Ignoring the employer HSA contribution. Free money that reduces the real cost, and it is frequently left out of benefit portal comparisons.

Forgetting the tax break. At a 24% marginal rate, $2,500 routed through an HSA is $600 that never becomes tax. Higher earners get more from this, which is part of why the answer differs by household.

Assuming last year repeats. Expected spending is the least reliable input on the page.

Treating an FSA like an HSA. FSA money generally does not roll over and is tied to the employer. The comparison is not close.

An open enrolment checklist

• Confirm your doctors and hospital are in network on both plans
• Read the real coinsurance percentage in the summary of benefits
• Check whether your prescriptions are on each plan’s formulary
• Enter the employer HSA contribution, including how it is paid out
• Run the comparison at expected spending and again at the out-of-pocket maximum
• Check you could cover the full deductible if a bad year started tomorrow
• Check the current HSA contribution limit before setting your payroll amount

Related coverage sits in the insurance section, and the rest of the tools are in our calculator library.