How it works
A health plan costs you two things: the premiums taken from your pay, and your share of the bills when you use care. A high-deductible plan swaps lower premiums for a bigger deductible, and it opens the door to a health savings account (HSA), which a PPO doesn't. So the fair comparison counts the HSA too:
- Your share of the bills is everything up to the deductible, then the coinsurance percentage of the rest, never more than the out-of-pocket maximum.
- Employer HSA money is cash toward those bills that only the HDHP gets.
- The tax your own contribution saves: your federal bracket plus state tax, plus 7.65% for Social Security and Medicare when it goes through payroll. The contribution itself isn't a cost; it stays in your account.
HDHP cost = premiums + your share of bills − employer HSA money − tax saved on your contribution
Worked example
The HDHP costs $60 a month with a $3,000 deductible, and the employer adds $750 to your HSA. The PPO costs $150 a month with a $1,000 deductible. Both pay 80% after the deductible. You put $3,750 into the HSA through payroll, in the 22% bracket with a 5% state tax, which saves $1,299 of tax.
With $2,000 of medical bills, the HDHP costs you $671 for the year and the PPO $3,000. Even in a bad year with $20,000 of bills, the HDHP comes to $4,671 against $6,300: its lower premiums, the employer money and the tax savings more than make up for its higher out-of-pocket maximum.
Take away the HSA money and the picture changes: with no employer contribution and nothing of your own, the PPO becomes cheaper once bills pass about $2,350. The HSA is what makes most high-deductible plans worth it.
Is the plan HSA-eligible?
Only a plan that meets the IRS definition of a high-deductible health plan lets you contribute to an HSA. For 2027 its deductible must be at least $1,750 for self-only coverage or $3,500 for a family, and its out-of-pocket maximum no more than $8,700 or $17,400. You can then put in up to $4,500 ($9,000 for family coverage), including your employer's money, plus $1,000 more from age 55. You can't contribute while you're on Medicare or covered by another plan that isn't a high-deductible one, such as a spouse's PPO.
Things to weigh
- Copays. Many PPOs charge a flat copay for office visits and prescriptions instead of coinsurance. Enter a coinsurance rate that roughly matches what you'd pay, or compare your own bills line by line.
- Cash flow. With an HDHP, a big bill early in the year can arrive before your HSA has much in it. Keep enough savings for the deductible.
- The networks. Both plans only work like this inside their network. Check that your doctors and pharmacy are in the plan you choose.
- The HSA keeps growing. Money you don't spend rolls over and can be invested, then spent tax-free on medical costs at any age. The HSA calculator shows how much it could grow. If you stay on a PPO, a health FSA gives a smaller, use-it-or-lose-it tax break; see the FSA calculator.
Questions people ask
Is a high-deductible plan worth it?
Usually, if your employer puts money in the HSA and you can afford to fund it yourself: the savings cover much of the higher deductible. It's less clear if you expect large bills and the HDHP's out-of-pocket maximum is much higher than the PPO's.
What happens to my HSA money if I switch back to a PPO?
It stays yours. You can keep spending it on medical costs tax-free; you just can't add new money while you're not on a high-deductible plan.
Are premiums taxed differently on the two plans?
No. Premiums for employer coverage usually come out of pay before tax on both plans, so they compare dollar for dollar. Only the HSA adds an extra tax break.
Sources
- IRS: Rev. Proc. 2026-24 (2027 HSA limits and high-deductible plan thresholds)
- IRS: Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans
- HealthCare.gov: deductible, coinsurance and out-of-pocket maximum (glossary)
Reviewed October 11, 2026 by The Dollars World team. How we build and check our calculators · Our data and formulas. This is general information, not financial advice.