Never had an HSA before. Stick with PPO?

You may want to check specifics. My insurance requires that you meet the family deductible before it really kicks in. If that is the case the difference in family deductibles would be $6,000/yr.

If you are confident that you will have less than $840/yr in medical expenses then the HSA would be fine, but I know with my family we would blow past that in the first couple months of the year.

Another thing to consider is the potential tax savings if you were to max out your HSA contributions. You could contribute an additional $7460 to your HSA (on top of what you already said you would). That would result in a tax savings of $2,212 assuming you are in the 22% bracket and that you save 7.65% in FICA taxes by contributing through payroll deductions (7460×(.22+.0765)).

I am a usually a big advocate of HSA. However, given your situation, sticking with the PPO might be the safer bet. With your low medical needs, the higher deductible of the HSA plan could be a burden if anything unexpected happens. The PPO offers predictable costs with copays for visits and a lower deductible, which seems to fit your usage pattern better. Plus, you’d avoid the high out-of-pocket costs if you or your daughter needed more extensive care. Saving $70 a month is nice, but the peace of mind with the PPO might be worth the slightly higher premium.

I chose HDP/HSA for two main reasons: 1. My company contributes to my HSA, offsetting some of the higher deductible costs. 2 There is no co-pay or 80/20 split when my deductible is met. And no lifetime cap. This means a big hospitalization or illness would have a cap on the cost to me. I also get the added bonus of maxing my HSA contributions and reducing my taxable income. I am at 32% for my top bracket. I use the HSA as an investment vehicle. I have never touched the money. I pay my expenses out of pocket. YMMV

I'd stick with the PPO. Your 'upside' of $840 in savings on a good year is wiped by 4x over by any kind of serious injury or event that sees you hitting a $10k deductible.

Heck, one trip to the urgent care and a set of xrays and you're probably even on the year.

Kids get sick/hurt and not that I think you'd neglect the needs of your child but without a massive financial reason I personally find it kind of skeevy to have a direct financial benefit to NOT taking kids to urgent care/ER/doctors/specialists. Take the PPO and leave well enough alone.

I was 35 and healthy when I chose an HSA plan in late 2022. Thought I’d ditch Kaiser and save a few grand with a high deductible plan. To my surprise, I got pregnant 3 weeks later. Racked up about 8k in medical bills in 2023 between me and my baby. High deductible plan w/ HSA was an absolute L for me.

Yes I have to go PPO here. The difference between my premiums and the $1k my company gives me for my HSA is like $3k so it’s a much easier decision for me

You shouldn't be looking at just the deductible of the HSA plan, but rather the difference between the deductibles of the two plans, and the difference between the out of pocket max.

The deductibles and copays determine your cost for an average year. The out of pocket max is the disaster scenario (unless you have a medical condition where paying the out of pocket max is practically guaranteed).

First, if disaster struck, do you have enough saved to cover the $13800 out of pocket max in the HSA plan? If the answer is "no", this isn't the plan for you.

Next, look at both plans based on your expected needs and determine your total out of pocket cost for a normal year plus the premiums for the two plans. Take the difference to see how much you might save with the HSA plan. Also consider tax savings from HSA contributions. Then, remember HSA funds can be invested and grow tax free, but this really only matters if you are already maxing out all other tax advantaged accounts currently available to you, and have the additional money to pay for current medical expenses out of pocket. That could mean a dollar saved now is worth $10 in retirement.

Add all that up, and how many years does it take to make up the $4800 difference in out of pocket max? How likely do you think you'll need to pay the out of pocket max?

Depends on if you want to self insure.   

I love HSAs.  You get to invest that money and it grows tax free.  You can take it out to pay for medical tax free.  

If you're healthy it's an even better deal.  

Will something come up?  Sure at some point but investing in yourself is a great plan if you can afford it.

I wouldn’t HSA unless you plan to max it out. It’s the ultimate retirement account. Arguably better than 401k/IRA. 

https://www.whitecoatinvestor.com/7-reasons-an-hsa-should-be-your-favorite-investing-account/

I had the same decision you are facing and I picked wrong (HSA). Imagine you need to go to the doctor for a stitch or to get a test done, with the HSA you are paying 100% for the visit until you have reached your max. I have two kids and while we are generally healthy, I have had to pay $1,500+ already which wipes out my HSA value on its own. It also leads you to be more conscious of going to the doctor because now I’m debating if I’m essentially sick enough to do something about it or not, and you don’t want to be doing that with your kids.

I think HSAs are designed for single people without children. I’m heading back to my PPO as soon as I can.

As a benefits professional- I don’t think the premium difference between the PPO and HDHP plan is enough to justify the super high deductible on your employers HDHP plan.

In my professional opinion, an HDHP deductible higher than the annual HSA contribution max is piss poor plan design. Stick with the PPO.

I’m debating this scenario as well as I start a new job in September where I’ll be for the next 5 years before retiring and qualifying for Medicare. I will be getting a company sponsored plan. I’m very healthy and only do 1 well care visit per year, dentist x 2, and vision every 2 years. My couple of prescriptions are about $75 per month. But I’m also physically active, an outdoor adventurer, commute on a major roadway daily, and entering my 60’s. So 1 accident or age related illness and my HSA would be wiped. And will the max contribution per year be enough?

My new company will be paying $200 per month into a VEBA account as well and that can sit for years for any out of pocket expenses.

When I think about my age, and how risk averse I am, it just gives me more peace of mind to go with PPO.

On a side note, and since you have a child (and for yourself) also think about supplemental accident insurance. I have it through Aflac and it’s not expensive. Had all 3 of my kids on it until they turned 21. It paid alot of medical bills due to their sports injuries and other stupid stuff they did. Also paid dome of my out of pocket expenses for a hiking accident that cost me about $5000 after insurance paid their part.

HSAs are great for healthy adults who won't need much care. It allows you to save and invest in what turns into an extra 401k. But if you have expenses HSAs stop being the best because of the mandatory HDHP.

Since you have a 9 year old, I'd go with the PPO. Your kid is going to get hurt. She's going to do kid things and wind up spraining an ankle, or breaking an arm, and needing care.

Stick with PPO. The premium spread is not big enough. At my company the difference is hundreds of dollars per month, on top of that my employer funds our HSA.

HSAs are overhyped in most of the scenarios I’ve encountered. The real big savings kicks in if you never use it for multiple years.

Are there any incentives for choosing HDHP, such as getting annular checkups and blood work done and in return you have a certain amount of money deposited into your HSA?

Echoing what others said below, in this case, it likely makes sense to stick with a PPO. That being said, I look at our HSA plan as a way to make tax-free contributions that can be invested. Employer contributes $2500, we put in the rest to max it out. In any given year we may end up paying slightly more for health care costs than we would have with a PPO, but in the long run, an HSA should yield a far better return.

For $70 more a month I would go with the PPO.

My work offers HMO and PPO, with the PPO costing something like $250 more per month, which is why I opted for the HMO. Our HSA option is in the middle of the two, really not making it a good option.

I know that the HSA makes good financial sense but knowing I could be on the hook for a lot of money makes me nervous.

If you don't obsessively worry and you have the ability to build the value of the account the HSA is a good choice.

All the math has already been answered. I just wanted to point out the emotional cost some people pay.

Do you get money from your company for HSS? We get $1600 free money.

The power of the HSA is to max it out and not use it until your retirement. It's pretax, growth is not taxed and when you use it for medical expenses, not taxed. So it's better than a 401k. You can take out money at retirement for non-medical expenses and then it's taxed like 401k. You can save all your qualified medical receipts and withdrawals 30 years down the road after it has grown!

Do you have any prescriptions you take? HSA prescription copays don't kick in until you've hit the deductible. That can be a MASSIVE difference.

Sorry that I'm not doing a deep analysis, but as a general rule, HSAs are better for younger and healthier people. Quite a few employers decide to kick in to their employee's HSA every year, and all of mine have at least. That makes it a semi-risky scenario if something large happens the first year, breaking even after a few years, and then every year after that becomes even better.

HSA short-term is more risky, but increases it's benefit the longer you have it and the longer you remain healthy. If the extra $3k ($5k deductible - $2k deductible) would not financial ruin you, then the HSA is likely better. Year 2 assuming you saved the $840, now it becomes $3k - $840.. and the next year... etc. Eventually you get to a point in which you can start investing that $840/year as well and let it grow.

I have had a HDHP with HSA for the past few years and it’s worked out well but now that my wife and 9 y/o son are also covered by my plan, the HSA is getting drained faster than I can replete it. Im considering switching to a PPO next year but haven’t decided yet. I’ll see what the details are at open enrollment time.

I think HSA's are designed for people in high income brackets, or people who are rarely sick. For me, I use it as a retirement savings option and I pay for for medical out of pocket 100% and don't touch the HSA. Since most of my families expenses are Rx related, this is fine for me. I'm using it to have a method to cover expenses when I retire.

That said, we had a couple of ER visits last year and I needed to be sure to have the $$ to pay for those until the deductible was met.

If you don't have the income to support this way of doing it, then PPO is going to be the safest option. As your income grows, may be worth a change but can totally understand why HSA doesn't work for your situation.

If you can really invest in the HSA, do it and invest. If you can't afford to put money in it, then do PPO

Neither plan looks great, but for that cost spread I'd probably take the PPO, unless the employer is giving you money in an HSA (not an HRA) to pay towards the deductible.

If they were giving you (for example) $2k a year on top of the $800 in contribution savings it would change the math a lot.

I would double double check it doesn't turn into an 80/20 or 90/10. I have an HSA but it turns to 80/20 until another threshold is met and then 90/10. But we save a big chunk of change over the PPO offered and since we have been on it for a few years have built up a decent balance, $40k+.

PPO…but also worth checking if your employer contributes to your HSA if you go with that. I have some clients whose employer will give them a big chunk to the HSA every year.

If you are relatively healthy, 100% the HSA. I look at the HSA as another retirement account which I can sock away money for retirement and not to mention even for medical purposes you can consider that as getting tax deductible payments for medical. With PPO you don't get the benefit of getting a tax deduction on your medical pyaments.

Remember HSA is triple tax advantaged and the money is yours to keep forever. This means it goes in tax free, grows tax free, and exits tax free if it’s used for medical expenses. This is better than a 401K. I wished I could have maxed out my HSA earlier due to compounding, however I’m a significant user of my insurance due to a couple of chronic conditions so most of it is currently used each year

Does your state have a child health insurance program? My state has child health plus and the income limits are pretty high, if you pay a small premium each month (income based $9-60/month). It may be a better option for your child than a family plan with your employer.

Generally companies offer a passthrough contribution with a HDHP. Are you sure your company doesn't do the same?

For my HDHP the company gives me a certain amount in my HSA which along with the cheaper premium saves me quite a bit even if I meet the deductible.

I've had HD before and honestly never could afford to use it, even with an HSA with company match. It was cheaper for me to often forgo insurance and pay cash for the few visits and procedures I needed. $70/month would have paid for half an urgent care visit.

I'm sick now, though, and my PPO has saved me a ridiculous amount. My family hits our deductible in a month or two, and from there on out, it's copays and very low coinsurance costs. I had surgery this year, billed at over 53k, and only paid 180 for it. I'm getting a 6k wheelchair for 600. Obviously, most people are healthier than I am, but if you pay medical costs for the kids on top of insurance, I would go with the PPO. Kids get sick and hurt a lot.

I mean I don't understand why option 2 is not also a HDHP. Any plan above a $1600 deductible ($3200 family) should be a HDHP plan, therefore HSA eligible. I would read the plan docs carefully if you would consider this plan with HSA contributions because you certainly should be able to legally.

HSA all the way. max the HSA as this lowers your taxable income. Also, invest the HSA money into the market.