What’s the difference between an HSA and PPO?

HSA stands for health savings account. Eligible people can contribute money with tax advantages and use it for qualified medical expenses. Your employer may contribute, too.

The account helps pay your share of care. It doesn’t remove the deductible or copays from the insurance plan. Money you don’t spend stays yours, including after a job change.

PPO stands for preferred provider organization. It describes a medical plan’s provider-access structure: you generally pay less with participating providers and have benefits for eligible care outside the network at higher costs.

Many PPOs allow direct specialist appointments, but check the particular plan’s referral and authorization requirements. A PPO label doesn’t establish the deductible, office copays, prescription coverage, or HSA eligibility. Provider access and the way a plan shares costs are separate features.

An HSA-qualified employer plan lets eligible members combine medical coverage with an account for current or future care. Employer HSA contributions can help cover bills, and unused account money remains available in later years.

These designs generally apply a deductible to much nonpreventive care before paying benefits, with exceptions for permitted services. Compare what you’ll pay early in the year with the premium and employer contribution. An HSA can serve people with regular treatment as well as people who rarely need care.

A copay-based design may cover certain appointments or prescriptions for a set amount before you meet the deductible. That can make regular care easier to budget for.

Suppose an appointment has a $200 in-network negotiated price. A plan with a $35 visit copay and deductible waived charges $35 for that covered visit. A deductible-first option may charge $200 until its deductible is met. These are illustrations; the actual plan determines the bill.

Compare the monthly difference, too. Paying an extra $50 per month adds $600 a year before any appointments. Include that amount when estimating which option costs less.

For HSA contributions, confirm that your coverage qualifies and that you meet the personal eligibility requirements. Medicare enrollment, other disqualifying health coverage, or being claimable as someone else’s tax dependent can affect eligibility. A high deductible alone doesn’t establish eligibility.

PPO benefits follow the insurance contract. Check separate outside-network deductibles, coinsurance, spending limits, and possible balance bills. Some outside-network expenses don’t count toward the in-network out-of-pocket maximum.

The rules for an HSA are straightforward. You can open an account with an HDHP and save up to $3,600 for an individual and $7,200 for a family. You’re restricted to only using it for health care purchases. However, as of 2020, that can include over-the-counter medications without a script, such as ibuprofen, cold medicines, and first aid supplies. A PPO doesn’t have restrictions as much as it has different costs based on the provider’s network status.

Your PPO pays benefits for services covered by its insurance contract. HSA savings can pay qualified expenses such as deductibles, prescriptions, dental treatment, and vision care, including some costs the medical plan doesn’t cover. Keep receipts and check the medical expense rules before using account funds.

Compare the plans’ annual payroll contributions, likely care costs, employer account contributions, and out-of-pocket limits. Then check your doctors, hospitals, and medications under each option. The HSA account adds a way to pay and save; the medical plan determines covered care and member costs.

BHT and your broker can help employers compare HSA-qualified and copay-based options using the actual benefits, rather than treating HSA and PPO as opposing choices.