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Key Takeaways:
- The PPO Savings Plan, a Qualified High-Deductible Health Plan (QHDHP), requires members to assume a higher initial risk for medical expenses, but comes with lower payroll deductions.
- This plan operates similarly to a high-deductible car insurance plan, where a lower annual premium is charged in exchange for the consumer bearing a greater proportion of costs in the event of an accident.
- To offset potential higher out-of-pocket expenses, employees can contribute pre-tax dollars to a Health Savings Account (HSA), which can be used during the plan year or rolled over to future years.
- Election of the PPO Savings Plan should be influenced by factors such as medical service usage, general health status, comfort level with higher out-of-pocket expenses, and potential medical claims in a given year.
- Conducting a comparative analysis of annual expenditures between current and potential plans can assist in making an informed decision about switching to the PPO Savings Plan.
Deciphering the PPO Savings Plan: A High-Deductible Health Plan with a Twist
The health benefits landscape can be challenging to navigate, particularly when various options are available. Among these, the PPO Savings Plan, first introduced in 2014, represents an alternative to traditional health plans. Despite its potential advantages, enrollment has remained relatively low, with employees often expressing inquisitiveness, skepticism, or indifference towards this option.
As a QHDHP, the PPO Savings Plan contrasts with traditional plans like the PPO Blue Plan in several ways. While it requires members to shoulder a greater initial risk for medical expenses, the PPO Savings Plan carries the advantage of lower payroll deductions. Conversely, the PPO Blue Plan has lower deductibles and out-of-pocket maximums but demands higher upfront costs in the form of greater payroll contributions.
The PPO Savings Plan: Car Insurance, but for Health?
Perhaps the most intuitive way to understand the PPO Savings Plan is to liken it to a high-deductible car insurance plan. Essentially, consumers pay a lower annual premium in exchange for covering a larger proportion of costs following an incident. The choice between a high-deductible or low-deductible plan hinges on several factors such as accident history, premium cost, individual comfort with potential out-of-pocket expenses, and repair costs for the type of vehicle driven.
Similarly, the decision to opt for the PPO Savings Plan over the PPO Blue Plan should be influenced by factors such as an employee’s payroll deduction for each plan, their usage of medical services and prescription drugs, their general health status, and their comfort level with the potential for higher out-of-pocket expenses in the event of significant medical claims.
Offset the High-Deductible: The Role of Health Savings Account (HSA)
An essential component of the PPO Savings Plan is the Health Savings Account (HSA). Employees can offset potential higher out-of-pocket expenses by depositing pre-tax dollars into an HSA, which can be utilized during the plan year or rolled over to subsequent years. When an employee enrolls in the PPO Savings Plan, an HSA is automatically established on their behalf.
For many employees, the PPO Savings Plan is a sensible choice over several plan years. For example, an employee who previously enrolled in the PPO Blue Family plan with an annual Flexible Spending Account (FSA) contribution of $1,200 could deposit the difference in payroll deduction between the PPO Blue and the PPO Savings plans into their HSA. By combining this with their previous FSA contribution amount and the Penn State contribution of $800, they could accumulate considerable savings.
Making the Call: Is the PPO Savings Plan Right for You?
Determining whether the PPO Savings Plan is the right fit involves a comprehensive analysis of annual expenditures for the current plan and a comparison with potential spending under the PPO Savings Plan. Employees need to consider all expenses incurred, including payroll deductions, fees for deductibles and co-insurance, and for the PPO Blue Plan, payments made for office visit co-pays and prescription drugs.
Importantly, when calculating the costs for the PPO Savings Plan, the employer’s contribution to the HSA should also be considered. Tools like the Highmark website can provide overviews of medical expenses and claims history, aiding in this comparative analysis.
Looking to the Future: Potential Changes to the PPO Savings Plan
With changes to IRS regulations governing QHDHPs, the 2016 coinsurance out-of-pocket maximum for the PPO Savings Plan will be lowered. This adjustment means the total maximum out-of-pocket cost-sharing for the plan year will be $6,800 for a Family and $3,400 for an individual.
The Final Word: Making Informed Choices about Healthcare and Payroll
Navigating the labyrinth of health benefits can seem daunting. The PPO Savings Plan presents an alternative approach to traditional healthcare plans, offering potential savings but requiring greater initial risk assumption. With a comprehensive understanding of the plan’s structure, a comparison of annual expenses, and consideration of individual health and financial factors, employees can make informed decisions that best suit their healthcare needs and financial circumstances.
As employees and HR professionals navigate the intersection of payroll and healthcare, the PPO Savings Plan provides a new route to explore, enabling both cost savings and improved healthcare outcomes.
