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Choosing the Best Health Insurance Plan for You

Everyone hates it. You just received your 8th email reminding you to pick your health insurance plan before your company’s open enrollment period closes. But how do you choose? As you click the link to your online portal and look at the details of each plan, it can seem nearly impossible to distinguish between them. The decision is confusing and overwhelming. There are so many different figures to consider, such as out-of-pocket costs, monthly premiums, coinsurance amounts, and a dizzying amount of detailed differences. According to Plansource, the average employee spends just 18 minutes enrolling in their benefits. 

But this is not a decision you should rush. Choosing the right health insurance plan can have a significant impact on your financial well-being and health outcomes. For most, the primary decision comes down to whether you want a more traditional health plan (i.e. a PPO) or a high-deductible health plan with a health savings account (HSA).

Which plan is the best option for you? While there is no one-size-fits-all answer to this question, we can look at some of the data on average health care claims vs insurance premiums to see where the average person would be better off.

What’s the winner for the average American? It’s a high-deductible health plan with a health savings account (HSA).

What is the Difference? 

A Preferred Provider Organization (PPO) is a health insurance plan with a network of doctors and providers. 

  • Typical Advantages:
    • Low copayment amounts for many in-network services
    • Lower deductible
    • Lower out-of-pocket maximums
  • Typical Disadvantages:
    • Higher monthly premiums
    • Out-of-network providers can be significantly more expensive

A High Deductible Health Plan (HDHP) is a plan with a high deductible which enables you to contribute to a Health Savings Account (HSA). 

  • Typical Advantages:
    • Lower monthly premiums
    • Tax-advantaged Health Savings Account (HSA) allows pre-tax contributions and tax-free growth for qualified medical expenses.

Which Plan is Best for You? 

In general, heavy users of the healthcare system are better off with PPO plans while lighter users are better off with the HDHP option. 

To decide the best option for most, let’s compare the average (median) spending on health care annually. According to data provided by the US Department of Health, the median health expenditure per person in 2021 was $1,970. Voya Financial did a study showing that nearly 60% of employees had medical claims of $2,000 or less. With claims of $2,000 or less, the average employee would generally save hundreds of dollars by choosing a high-deductible health plan of a PPO. The added tax benefit of contributing to an HSA makes the HDHP plan even better! 

Kiplinger did an analysis based on the data from Voya and the Kaiser Foundation showing that the average employee would save between $326-$566 per year by choosing a HDHP over a PPO:

  • 25-34 age group saved $566 annually
  • 35-44 age group saved $481 annually
  • 45-54 age group saved $395 annually
  • 55-64 age group saved $326 annually

The following chart from the Kaiser 2023 survey shows the worker premium difference in 2023: 

Based on the chart above, a single worker would pay $314 less in contributions with a HDHP plan than a PPO in 2023. A worker covering their entire family would pay $1,806 less with a HDHP than a PPO.

Conclusion

Based on the data, the average person would be best off choosing a HDHP over a PPO. Of course, plan details vary widely between employers so you will want to look at the details of your options and consider your unique health care needs. This data hopefully gives you a good starting point in your analysis! Reach out if you would like to discuss your situation. 

Scott Caufield, CFA, CPA