PPO or High Deductible Healthcare Plan: Which is Better?
Companies typically offer a period of open enrollment in the fall, which gives employees the opportunity to review healthcare offerings and evaluate their plan selections. As Private CFOs® to our clients, we help families through this process each year. One important decision might be choosing between a high deductible plan, which could include access to a Health Savings Account (HSA), and a PPO (Preferred Provider Organization) plan.
A few important considerations when analyzing your options:
Cost/Ability to Incur a Larger DeductibleHigh deductible plans can be much cheaper per month, but you will have to come out of pocket for a larger amount to reach your deductible
Access to a Health Savings Account (HSA)A savings account funded with pre-tax dollars (lowering your taxable income), which allows you to save and invest for future healthcare needs. These funds do not expire and do not need to be used each year, so your balance can grow/compound substantially over time. Also, many companies offer a contribution to your HSA for choosing a high deductible plan - free money!
- In 2022, a family can put away up to $7,300 and an individual can put away up to $3,650
- For those 55 and older you can save an additional $1,000
Upcoming Medical NeedsIf you don't have a proper emergency reserve of cash and have large upcoming expenses (elective surgery or having a baby), a PPO might be a better option as your out-of-pocket expenses could be more limited in the short term
Healthcare costs continue to rise and make up a large part of expenses in retirement. In fact, Fidelity's most recent study states that for a 65-year-old couple that number could be as much as $300,000 (net of taxes) over your retirement years. Making the right plan selections each year can have a meaningful impact on both your immediate and long-term financial health!