Flexibility and Choice: HSA and PPO

Flexibility and choice are key considerations when choosing the right health plan for your small business. For many small business owners in California and Arizona, the decision often comes down to two popular options: health savings account (HSA) plans and preferred health care organization (PPO) plans.

asRecent articles The Motley Fool sums it up this way:

“When choosing between different types of health insurance plans, you may be comparing health savings accounts (HSAs) and preferred provider organization (PPO) plans. HSAs help you save on health care costs, and PPO plans provide access to a network of health care providers.”

Each offers unique benefits, but understanding the differences will help you choose the best option for your employees and budget. Understanding the flexibility and choices that HSAs and PPOs offer can help you make an informed decision.

Understanding Health Savings Accounts (HSAs)

HSA A tax-advantaged savings account combined with a High Deductible Health Plan (HDHP). Employees can contribute pre-tax money to the account, which can be used to pay for qualified medical expenses, such as doctor visits, prescriptions, and some dental and vision care. HSAs are especially attractive because they offer a variety of tax benefits.

• tax deductible donations: Employees donate pre-tax money to lower their taxable income.
• tax-free growth: Money in an HSA grows tax-free, similar to a retirement account.
• tax-free withdrawal: If you use the funds for qualified medical expenses, you will not be taxed on withdrawals.

One of the great features of HSAs is the flexibility they provide employees. Unlike other types of health insurance, HSAs are fully owned by the employee. This means that even if you change jobs or leave the company, the funds in your HSA will remain available for future medical expenses. Additionally, unused funds are carried over from year to year, allowing employees to save significant money over time and potentially use these funds to pay for health care costs in retirement.

Explore PPO Plans: Flexibility in Network Access

PPOAlternatively, a Preferred Provider Organization is a type of health plan that gives you more flexibility when choosing a health care provider. A PPO allows employees to choose both in-network and out-of-network providers, but care from in-network providers is generally covered at a higher rate. PPOs do not require employees to choose a primary care physician or obtain referrals to see specialists. This can be a huge benefit for people who need regular specialist care.

PPOs are often preferred by businesses and employees who want more freedom when choosing their health care provider. Employees can see out-of-network doctors and specialists, but out-of-pocket costs are typically higher than for in-network services. The main disadvantage of PPOs is that they offer greater provider flexibility, but monthly premiums tend to be higher compared to HSA/HDHP plans.

For small businesses in California and Arizona, where the availability of health care providers can vary by location (particularly in rural areas), PPOs provide a valuable solution by expanding access to care beyond limited networks.

Compare Cost Structures: Premiums, Deductibles, and Out-of-Pocket Costs

One of the most important factors for any business when choosing a health care plan is its cost structure. bothHSAs and PPOsWe offer a variety of approaches to managing healthcare costs.

• HSA: For HSAs, the plan is typically combined with an HDHP, which has lower premiums but higher deductibles. This means employees may have to pay more out-of-pocket before insurance begins to cover the costs. However, the tax benefits of an HSA can help offset these costs. Employees also have the flexibility to decide how much they contribute to their HSA, giving them more control over their health care spending.
• PPO: On the other hand, PPOs have higher premiums but lower deductibles, making them more attractive to employees who expect to use health care more frequently. PPOs typically cover a significant portion of medical costs upfront, which can result in lower out-of-pocket costs for employees, especially when using in-network providers.

The key difference here is that HSAs are generally best suited for employees who are healthy and use health care infrequently, while PPOs are better suited for employees who need more consistent care.

Flexibility in managing medical expenses

Another area where HSAs and PPOs differ is in how they manage healthcare costs.HSA Give your employees ultimate flexibility to control their healthcare costs. Because employees own their HSAs, they decide when and how to use the funds for eligible expenses. You can also save money for future medical needs or invest for long-term growth. This flexibility is especially attractive to younger employees or employees planning for retirement.

PPOs, on the other hand, offer flexibility in terms of provider selection. Employees may visit any provider, including specialists, without a referral. PPOs offer greater freedom in accessing care, but cost-sharing is structured with employees responsible for copayments, deductibles, and coinsurance.

Suitable for small businesses in California and Arizona

The choice between an HSA and a PPO can vary greatly depending on the type of business you run and the needs of your employees. In California, where the technology industry is thriving and many workers are younger, healthier, and value long-term savings, an HSA may be a better option. These employees are more likely to benefit from tax breaks and the ability to invest unused funds for the future.

This has come to light in recent years. From a CNBC articlefamous,

“Data from the Charles Schwab 2022 401(k) Participant Study shows that 48% of Millennials and Gen Zers who were given the option to contribute to a health savings account (HSA) chose to do so. This move was motivated by a desire to start saving for healthcare-related expenses in retirement.”

Popularity tends to emerge in specific industries. For example, USAFacts.org estimates that by July 2023, about a quarter of young people will16-24 years old The leisure and hospitality sector has the highest proportion of young people of any industry.

A PPO may make more sense in Arizona, where industries such as construction and agriculture have a higher risk of physical injury. Employees in these industries may need more immediate access to health care providers and specialists, which a PPO plan can provide. Higher premiums may be worth it for lower out-of-pocket costs and more comprehensive coverage.

HSA and its long-term benefits PPO

HSAs offer long-term benefits that PPOs cannot: the ability to save on future medical expenses. Funds in an HSA roll over from year to year and can also be invested similar to a 401(k). This makes HSAs an attractive option for employees looking to save for post-retirement medical expenses.

Meanwhile, PPOs provide more immediate access to care and greater flexibility in terms of choosing a provider. For employees who expect to use health care frequently or who have chronic conditions, a PPO can provide peace of mind by covering a significant portion of the health care costs upfront.

Employee Engagement and Satisfaction with Hsas and Ppos

Employee satisfaction is an important consideration when choosing a health care plan. HSAs tend to appeal to:Employees who are financially well offEnjoy the control and flexibility these plans provide. HSAs can also encourage healthier behaviors by allowing employees to take a more active role in managing their health care expenses.

PPOs, on the other hand, tend to be simpler for employees to navigate. You don’t have to worry about managing your HSA or figuring out how much to contribute. ‘PPOs may be more attractive to employees who value ease of use and broad access to care.’

Choose the option that’s right for your business

Ultimately, the choice between an HSA and a PPO will depend on your employees’ needs and your business budget. HSAs offer long-term financial benefits, tax advantages, and flexibility in managing health care costs, making them a great choice for young or healthy employees. PPOs are ideal for employees who value immediate access to a broad network of doctors and specialists because they offer greater access to providers and lower out-of-pocket costs for frequent care.

Consulting with an experienced insurance broker can help you evaluate these options and choose the plan that best suits your small business’s needs, whether you’re located in California or Arizona.

JC Lewis: Your Partner to Optimize Healthcare Benefits for Your Business

JC Lewis Insurance Services offers California andArizona. Our expertise and certifications allow us to provide comprehensive coverage tailored to the needs of small group employers.

Navigating the complexities of employee health benefits can be overwhelming, but you don’t have to do it alone. The JC Lewis Insurance Services team will guide you every step of the way, from choosing the right plan to managing renewals and ongoing support.

We also specialize in helping seniors find Medicare supplement and prescription drug plans that fit their needs.

Whether you’re exploringsmall group insurance(1 to 50 employees), considering the Small Business Health Options Program (SHOP), or resolving employer-related insurance issues, JC Lewis is committed to finding the ideal solution for your business.

Contact us today! Your peace of mind is our mission, and we are committed to helping you secure the best insurance package for your unique needs.