How to Compare PPO and High-Deductible Insurance Plans

Look beyond the bottom line to understand coverage when choosing health insurance. Images

With so many different types of plans and providers to choose from, selecting the best health insurance for yourself or your family can feel overwhelming. While the majority of Americans stick to preferred provider organizations or other managed care plans, more families are now choosing consumer-driven health care in the form of high-deductible health plans. Before you sign on the dotted line, compare the total cost and coverage of these plans to better manage both everyday care and medical emergencies.

PPO Overview

A PPO plan is a managed care plan, which means the plan is guided by both insurance and medical professionals. This type of plan gives you greater freedom than a traditional health maintenance organization, allowing you to visit both in-network and out-of-network practitioners, but also comes with higher premiums. You'll typically pay a co-pay or co-insurance when visiting your doctor or undergoing a medical procedure, but you benefit from the discounted rates that come with managed care plans. Once you reach a certain deductible limit, the insurance plan covers the remainder of your medical costs for the year.

HDHP Overview

A high-deductible health plan, or HDHP, is considered a consumer-driven program rather than a managed care plan. You enjoy greater control over your medical care, and are often free from the system of referrals and networks associated with HMOs and PPOs. With an HDHP, you pay the entire cost of doctor's visits and other procedures, with no co-pays or co-insurance. You will not receive the negotiated or discounted rates given to members of managed care health plans. Once you have met a specified deductible, the health insurance plan pays the remainder of your annual medical costs. The biggest drawback to these plans is that the deductible is often quite high, which means a higher out-of-pocket cost before the insurance kicks in.

Compare Costs

In order to compare PPOs and HDHPs, it's important to consider the total annual cost for each plan. One of the biggest costs associated with any health insurance plan is the cost of premiums. While costs for these plans vary significantly, the Wall Street Journal reports that PPO premiums can be as much as four times higher than HDHP premiums. In addition to premiums, consider your total estimated co-pays and coinsurance to determine the total annual cost of a PPO. To estimate the annual cost of a HDHP, multiply your total number of annual visits to the doctor with the full rate your doctor's charges for each visit. This can give you an idea of your out-of-pocket costs with each plan.

Consider Deductibles

Once you understand the cost of each plan, evaluate how large of a deductible you can comfortably pay. According to the Wall Street Journal, a typical PPO might come with a deductible of $250, while a standard HDHP could come with a deductible of $2,500. Consumer Reports recommends selecting a plan with a deductible you could comfortably pay if the worst-case scenario were to occur.

Understand Coverage

Finally, weigh the cost of each type of plan with the services offered, then consider your own personal medical needs. For example, some PPO or HDHP plans may cover most office visits and procedures, but could exclude prescriptions or certain conditions, such as pregnancy. Others cover chronic conditions, while other may exclude them. To make the best decision when comparing a PPO and HDHP, look beyond co-pays and deductibles to find the policy that best meets your individual needs.