HSA vs PPO
Business Health Trust teams up with Kaiser Permanente and Premera Blue Cross which are two of the most respected health insurance companies in Washington. Both Premera and Kaiser offer HSAs and both of these insurers offer PPO insurance plans.
You’re here because you want to know about HSA vs. PPO and how they differ. There are many types of health insurance and health savings options. Sometimes it’s difficult to tell the difference between them. Take a few minutes to learn about the differences between the various health insurance and savings choices available to you.
HSA stands for health savings account. An HSA is an account that you can use to pay medical expenses without deductibles or co-pays. HSA plans let you deposit funds before taxes into an HSA-designated account. You can then withdraw those funds to pay for specific health expenses. An HSA differs from an FSA or flexible savings account.
A PPO is a health plan type that only covers certain medical providers in a network. PPO is an acronym and stands for preferred provider organization.
Health savings accounts are an excellent way for those with high-deductible health plans (HDHP) to save money on future medical expenses. They allow you to put pre-tax dollars towards your deductible and other out-of-pocket costs that might come up down the line, like prescriptions or doctor visits. You can open an HSA as long as you have an HDHP. Additionally, if you don’t spend all the money in the account, it rolls over tax-free to the next year to use for medical expenses.
The HSA is a tool created in 2003 for people who take advantage of the high deductible plans – which typically offer cheaper monthly premiums than traditional insurance plans but have more out-of-pocket costs than a non-HDHP plan. HSA plans were created so that people could have some money to put towards significant medical expenses if they arise.
However, the HSA comes with limits. Each year these are adjusted for the cost of living and other factors. A higher limit is available for people 55 and older, saving towards medical costs during their retirement. For 2021 this was an extra $1000 per person. The PPO sets an out-of-pocket limit. Once the insured reaches that amount, they don’t have to pay more towards their plan for the year.
An HSA is an additional benefit for people with HDHP to save on medical costs. The PPO is a more flexible health insurance plan for people who have doctors and facilities they use that are out-of-network. For example, if an employer offers two plans and neither covers your cardiologist or optometrist, but one option is a PPO, you can still see your preferred specialist. However, it will cost a little more.
Another benefit of a PPO is you won’t need referrals from your primary care doctor to see a specialist. So, if you have a teenager with acne, you can skip the family physician and go straight to the dermatologist.
Spouses can contribute to two different HSA accounts. The IRS doesn’t care if you have two accounts, but the contributions can’t exceed the total for the family. Going over the amount and spending it can result in a tax penalty.
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.
You can use your HSA to pay for any medical expenses, including over-the-counter medication costs. Before 2020, that didn’t include over-the-counter drugs without a prescription. For example, your doctor recommends omeprazole, which used to be by prescription only but now is available over the counter. If you have them write a prescription, you can use your HSA to pay for it.
A PPO should cover any reasonable service charge from an in-network and out-of-network provider. But you must meet your deductible before the insurance provider pays for the expenses.
Although the whole cost of the appointment and any accompanying services count towards the deductible for out-of-network expenses, you most likely won’t get a lower price with these providers. The PPO negotiates lower rates with all in-network providers, and even when you’re still paying your deductible, you get the discounted price. However, as mentioned, you can have a PPO and an HSA if you have an HDHP. So, you can pay for the appointment with an HSA and save a little money.
Both plans offer distinct advantages and disadvantages depending on the person’s financial and health situation. Each has rules that may be less beneficial than the other. For example, people who have high-deductible health plans and want to put money aside for future medical expenses should consider an HSA. Additionally, people on a budget that have out-of-network medical care needs. However, you can have an HSA with a PPO if you have an HDHP.
Washington companies with two or more enrolled employees are eligible to participate in the Business Health Trust benefit program. Participation requires membership with the Seattle Metropolitan Chamber of Commerce or one of our partner organizations: Bellingham Regional Chamber of Commerce, Economic Alliance Snohomish County, Tacoma-Pierce County Chamber of Commerce, Thurston County Chamber of Commerce, Greater Yakima Chamber of Commerce and Archbright. Your membership in any of the above organizations automatically qualifies you for one of our 13 industry group memberships (at no additional cost), and all the advocacy, resources and savings that go along with it.