● Money & small business
HDHP vs PPO: when the high-deductible plan with an HSA really costs less
At open enrollment the high-deductible plan usually has the lowest premium and the scariest deductible. Which one costs less depends on three things: how much care you use, how much your employer puts in your HSA, and whether you put money in yourself. Here's one example, worked through with the sample file of our health plan comparison spreadsheet. Every figure comes from the same model, which was checked claim by claim. The plans are examples, not averages: use your own.
The two plans
| PPO 500 | HDHP + HSA | |
|---|---|---|
| Your premium | $180 a month ($2,160 a year) | $60 a month ($720 a year) |
| Deductible | $500 | $3,300 |
| Coinsurance after the deductible | 20% | 20% |
| Out-of-pocket maximum | $3,500 | $6,500 |
| Employer HSA money | none | $750 a year |
The person in the example puts $2,000 a year into the HSA and pays 30% in tax on the margin (federal, state and payroll taxes together). Contributions go in before tax, so that saves $600. The $2,000 itself isn't a cost: it stays in the account for future care.
Net cost for the year at every level of care
Net cost = premiums + what you pay for care − the employer's HSA money − the tax saved. Care means the plan's allowed amounts for the year.
| Care in the year | PPO 500 | HDHP + HSA | Cheaper |
|---|---|---|---|
| $0 | $2,160 | −$630 | HDHP by $2,790 |
| $1,000 | $2,760 | $370 | HDHP by $2,390 |
| $2,500 | $3,060 | $1,870 | HDHP by $1,190 |
| $5,000 | $3,560 | $3,010 | HDHP by $550 |
| $10,000 | $4,560 | $4,010 | HDHP by $550 |
| $15,000 | $5,560 | $5,010 | HDHP by $550 |
| $20,000 | $5,660 | $5,870 | PPO by $210 |
| $30,000 or more | $5,660 | $5,870 | PPO by $210 |
With no care at all the HDHP comes out $630 ahead: the employer's $750 and the $600 of tax saved are more than its $720 of premiums. The gap shrinks while the HDHP deductible is being paid, then holds at $550 while both plans are in coinsurance. The PPO only becomes cheaper once its out-of-pocket maximum is reached and the HDHP's isn't: above $18,250 of care. In the worst year, the HDHP costs $210 more.
The HSA money is what makes it win
Take the HSA money away and the picture changes. Where the PPO becomes the cheaper plan (and stays cheaper), same plans and premiums:
| Case | HDHP net cost at $2,500 of care | PPO cheaper above |
|---|---|---|
| Employer $750 + you put in $2,000 (30% tax) | $1,870 | $18,250 |
| Same, but a 22% tax rate | $2,030 | $17,450 |
| You put in nothing | $2,470 | $3,237.50 |
| No employer money | $2,620 | $3,050 |
| Neither | $3,220 | $2,300 |
| You put in $3,650 (with the employer's $750, the $4,400 limit) | $1,375 | never: the HDHP costs less even in the worst year ($5,375 vs $5,660) |
Without any HSA money, the HDHP is only the cheaper plan up to $2,300 of care a year. So "pick the high-deductible plan" is really two decisions: pick it, and fund the HSA.
And the HMO?
The sample file also has an HMO at $110 a month with a $1,500 deductible, 30% coinsurance and a $5,000 out-of-pocket maximum. Against the PPO alone, it's cheaper up to about $1,900 of care and more expensive above. Against the funded HDHP it never wins in this example: at every level from $0 to $100,000 one of the other two plans costs less.
Checking your own plans
- From each plan's summary of benefits, take your share of the premium, the deductible, the coinsurance and the out-of-pocket maximum (for the coverage level you'll be on: self-only or family).
- Add the employer's HSA contribution, and what you'd realistically put in yourself. The 2026 limit is $4,400 for self-only coverage and $8,750 for family coverage, including the employer's part, plus $1,000 from age 55.
- Estimate this year's care from last year's claims, and check a bad year too. The plan that's cheapest at your usual spending may not be the one you can afford in a bad year.
- Check what this model doesn't cover: copays outside the deductible, separate deductibles for each family member, your doctors being in network, and drug coverage.
To run your own plans now, the free health plan cost calculator compares up to three plans at every level of care. Every figure above comes from the sample file of our health plan comparison spreadsheet and the same model, which was checked claim by claim through the year. It's an illustration, not financial, tax or medical advice.