Health Savings Account Vs. PPO

An HSA account can be used for co-pays and co-insurances on a PPO policy.

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A health savings account, or HSA, is very different from a personal provider organization, or PPO. Both types of medical benefit products are common parts of benefit packages. PPO is a common type of employer health plan, whereas an HSA is money you set aside for personal health expenditures.

Health Savings Account Basics

An HSA is a common benefit that allows you to have a certain amount of your annual income held pre-tax in a benefit account. Whatever amount you select annually is broken up into installments with equal amounts held from each check. If you get 24 paychecks in a year and you elect to have $2,400 placed in your HSA, each paycheck has $100 in gross pay withheld. The money in your HSA is used to pay for health costs not covered by your insurance, including co-payments, co-insurance and various types of dental and health services and devices. As of 2012, the maximum you can put pre-tax in your HSA with a self-only high-deductible insurance plan is is $3,100 annually, the maximum is $6,250 with a family plan.

Pros and Cons

The major benefit of an HSA is that funds are taken pre-tax. This means the money is set aside by your employer before your gross income is taxed as opposed to you paying for health costs with net income after taxes. Typically, people save 25 to 40 percent on health costs paid for through an HSA. You can use the benefits for any eligible person on your insurance policy, including your spouse and dependents. Along with the financial advantages, an HSA is a way to budget health expenses since you can use the total funds anytime during the coverage year, but your payments are taken each paycheck in equal amounts. Money left in your account carries forward to the next year. The primary drawback is that the contribution limit is based on amounts you contribute to a high-deductible health insurance plan.

PPO Basics

A preferred provider organization is a network of mental and physical healthcare facilities and practitioners, including general and specialist providers. Employer-sponsored health providers commonly set up PPO networks for insured groups. The insurer saves money by contracting set rates with network providers. They then offer better benefits to insured people who use in-network providers for care. The health professionals and facilities benefit from being part of the directory promoted to people in the insured group.

Pros and Cons

Employees generally have strong benefits with PPO coverage. Co-payments, often ranging from $10 to $20 for office visits and co-insurances, ranging from 0 to 20 percent of treatment costs are common. Normally, your policy has individual and family annual deductibles for treatment. Deductibles vary greatly depending on the policy type. The primary drawback of a PPO policy is the requirement that you use an in-network provider. Benefits are usually lower and deductibles higher for out-of-network care.