HDHP vs PPO at open enrollment: how to choose, and when the HSA wins

To choose between a high-deductible health plan (HDHP) and a PPO, add up each plan's total yearly cost: the premiums you'll pay, plus the care you expect to use, minus anything your employer puts in a Health Savings Account (HSA), and then check what each would cost in a bad year, up to its out-of-pocket maximum. An HDHP usually wins when its premiums are clearly lower, your employer adds HSA money and you can cover the deductible from savings; a PPO often wins when you expect a lot of care or the premium gap is small.

Neither plan is the "smart" one. It depends on your plans' prices, your health and your cash cushion, and the arithmetic takes about 20 minutes with your benefits guide open. This guide walks through it, with the IRS limits for 2026 and 2027 and a made-up household you can follow.

This is general education, not financial, tax or insurance advice. Plan details vary a lot, and your benefits guide and summary of benefits and coverage are what count. Check the IRS and Healthcare.gov sources linked here, your plan documents, or a tax professional before you decide.

Figures checked October 28, 2026 against IRS.gov (Revenue Procedures 2025-19 and 2026-24, Notice 2026-5 and Publication 969), Healthcare.gov's pages on HSA-eligible plans and open enrollment dates, and Medicare.gov's page on working past 65. The IRS updates the limits each spring for the following year.

What the two plans actually are

The names compare two different things, which is part of the confusion.

• PPO (preferred provider organization) describes a network: you can see in-network doctors without a referral, and out-of-network care is usually covered at a higher cost. PPO plans at work often have a lower deductible, set copays for visits and prescriptions, and a higher premium.
• HDHP (high-deductible health plan) describes the cost-sharing: you pay the full negotiated price for most care until you've met a higher deductible, then share costs up to the out-of-pocket maximum. Many HDHPs use a PPO network too. What makes a plan an HDHP for tax purposes is meeting the IRS deductible and out-of-pocket rules, and that's what lets you open an HSA.

Preventive care, like checkups and recommended screenings, is covered before the deductible on HSA-eligible plans (Healthcare.gov). So is telehealth on many plans: Congress made that exception permanent in 2025 (Notice 2026-5).

So at open enrollment, the real question is usually: "Do I want lower premiums and an HSA, in exchange for paying more before coverage starts?"

The 2026 and 2027 IRS limits

Sources: [IRS Rev. Proc. 2025-19](https://www.irs.gov/irb/2025-21_IRB) (2026), [IRS Rev. Proc. 2026-24](https://www.irs.gov/pub/irs-drop/rp-26-24.pdf) (2027), [IRS Publication 969](https://www.irs.gov/publications/p969) (the $1,000 catch-up). Healthcare.gov shows the same figures on its [HSA-eligible plans page](https://www.healthcare.gov/high-deductible-health-plan/).

Open enrollment at work this fall usually picks your plan for 2027, so the 2027 column is the one to plan with. Two details:

• The contribution limit includes your employer's deposits. If your employer puts in $1,000 for family coverage in 2027, you can add up to $8,000 more (plus $1,000 if you're 55 or older).
• The out-of-pocket maximum is a ceiling, not a target. Most plans set theirs well below the IRS maximum. Use your plan's own figure.

How to compare: total yearly cost

Grab the summary of benefits for each plan and fill in this for both:

1. Premiums. Your share per paycheck × paychecks per year.
2. Expected care. What you'd pay for a normal year: regular prescriptions, visits, therapy, a planned procedure. Under an HDHP, you pay the plan's negotiated price until the deductible is met, so ask your insurer or check its cost tool for prices.
3. Minus employer HSA money. Many employers deposit money in your HSA if you pick the HDHP. It's yours to keep, even if you leave the job (Healthcare.gov).
4. Minus tax savings (optional). HSA money you put in through payroll is generally excluded from income and generally isn't subject to Social Security and Medicare taxes either (Publication 969). That's a real benefit, but it only shows up if you can afford to put money in.
5. The bad-year number. Premiums + the out-of-pocket maximum − employer HSA money. This is what each plan costs if something serious happens.

The plan with the lower normal-year total usually wins, as long as you could live with its bad-year number.

A worked example: Riley's family

Riley is made up for this guide. Riley is 56, covers a partner and a teenager through work, and is choosing a family plan for 2027. To keep it simple, the numbers below are invented but realistic-looking, and "care" means what each plan would charge for the same services.

Three possible years:

With these prices, the HDHP costs less in all three years, mostly because of the $2,160 premium gap and the employer deposit. The catch is timing: in a middling year, Riley pays $3,500 of bills before the HDHP shares costs, often early in the year. Riley's family can only choose the HDHP comfortably if they have that much in savings, or in the HSA.

On top of that, the tax savings. Riley can put up to $9,000 in the HSA for 2027: the $9,000 family limit, minus the employer's $1,000, plus the $1,000 catch-up for being 55 or older. Say Riley puts in $3,000 through payroll. If Riley's federal tax bracket is 22%, that saves about $660 in federal income tax and about $230 in Social Security and Medicare taxes, roughly $890 in all, before any state tax savings.

When the PPO comes out ahead

Change two things: the premium gap is only $600 a year (PPO $3,840, HDHP $3,240), and the employer doesn't add HSA money.

Now the HDHP saves $100 in a light year and costs more in every other year. The tax savings narrow the gap, but for a household that uses care regularly, the PPO is the calmer and cheaper choice. Same people, different plan prices, opposite answer. That's why it's worth doing the sums for your own plans each year.

Who an HDHP tends to suit, and who it may not

An HDHP and HSA often fit if you:

• Have savings that could cover the deductible without stress, or would build them quickly.
• Expect light or predictable care, mostly preventive.
• Get a meaningful employer HSA deposit or a big premium difference.
• Like the idea of an account that can grow for decades. The HSA as a long-term account explains how people use it on the road to FIRE.
• Are catching up: from 55, the extra $1,000 a year is one more tax-advantaged place to save in your last working years.

A PPO or other lower-deductible plan often fits if you:

• Expect ongoing or planned care: a pregnancy, a surgery, a chronic condition, regular specialist visits or expensive prescriptions.
• Would put off care to avoid paying the full price before the deductible. Skipping care to save money can cost much more later.
• Don't have a cash cushion for the deductible yet. The emergency fund on the road to FIRE can help with that.
• Find the premium gap small once you add it all up.

Neither list is about who's more disciplined. Different health, budgets and plan prices lead to different answers, and a plan that fits this year may not fit next year.

Rules worth knowing before you pick the HDHP

• Other coverage can rule out an HSA. A general-purpose health flexible spending arrangement (FSA) or HRA that pays medical bills before the deductible generally means you can't contribute, even if it's through a spouse's job. A limited-purpose FSA or HRA (dental, vision and preventive care) is allowed (Publication 969).
• Family plans have a special rule. If a family plan has an individual deductible for each person, it must still be at least the family minimum ($3,500 in 2027) for the plan to count as an HDHP (Publication 969). Your plan's documents will say whether it's HSA-eligible.
• You can't be claimed as a dependent on someone else's tax return, and you can't be enrolled in Medicare (Publication 969).
• Direct primary care is now allowed. From 2026, a direct primary care membership with fees of no more than $150 a month ($300 if it covers more than one person) doesn't stop you from contributing, and you can pay those fees from your HSA (Notice 2026-5; the same limits apply in 2027 under Rev. Proc. 2026-24).

If you're 63 to 65: Medicare and the HSA

Once you're enrolled in Medicare, your HSA contribution limit is zero. That includes periods of retroactive coverage: if you sign up late and your Part A is backdated, contributions made during those months count as excess contributions (Publication 969). Part A can be backdated up to six months, so Medicare.gov suggests that you and your employer stop HSA contributions six months before you retire and sign up (Medicare.gov).

If you'll turn 65 or retire during 2027, it can be worth choosing a plan with that in mind, and planning your HSA deposits for the months you're eligible. Money already in the HSA stays yours and can pay Medicare premiums later (except Medigap). More in Medicare in plain English.

Buying your own coverage before 65

If you've left work early, the choice looks different. Healthcare.gov open enrollment for 2027 runs November 1 to January 15; enroll by December 15 for coverage that starts January 1 (Healthcare.gov).

Since January 2026, bronze and catastrophic plans available on the marketplace count as HDHPs for HSA purposes, even if their deductibles and out-of-pocket limits don't match the usual IRS rules (Notice 2026-5). Catastrophic plans are generally limited to people under 30 or those with a hardship exemption. For early retirees, that means a bronze plan can now pair with an HSA. Your income also decides how much help you get with premiums, which can matter more than the plan type. See What is the ACA subsidy cliff? and Health insurance before Medicare.

Working part-time partly for the benefits? Part-time jobs with health insurance covers which employers tend to offer them.

Questions to ask at open enrollment

• What's the premium difference per paycheck, and how much does the employer put in the HSA?
• What did our household actually spend on care this year? Your insurer's online claims history shows it.
• Is anything planned for next year? A surgery, a baby, a new prescription?
• Could we pay the HDHP's deductible from savings if it all came in January?
• Are our doctors and prescriptions covered the same way on both plans?
• Does anyone in the household have a general-purpose FSA, including through a spouse's job?
• Is anyone turning 65 or retiring in the next year or so?

Common questions

Is an HDHP better than a PPO?

Neither is better for everyone. An HDHP usually costs less over the year when its premiums are clearly lower, your employer adds HSA money and you expect light care. A PPO often costs less when you expect regular or planned care, or the premium difference is small. Add up premiums, expected care and employer HSA money for both plans, then compare the worst case for each.

What are the HSA contribution limits for 2027?

For 2027, you can contribute up to $4,500 with self-only HDHP coverage or $9,000 with family coverage, including any employer contributions. If you're 55 or older by the end of the year, you can add $1,000. For 2026, the limits are $4,400 and $8,750.

What is the minimum deductible for an HDHP in 2027?

For 2027, a plan must have a deductible of at least $1,750 for self-only coverage or $3,500 for family coverage, and an out-of-pocket maximum of no more than $8,700 or $17,400, to count as a high-deductible health plan for HSA purposes. For 2026, the figures are $1,700 and $3,400, with maximums of $8,500 and $17,000.

Is an HSA worth it if I'm over 50?

It can be. From 55, you can contribute an extra $1,000 a year, and HSA money spent on qualified medical expenses is never taxed, which helps with health costs before and after Medicare. Contributions stop once you're enrolled in Medicare, so the window is shorter than for a 401(k). Whether the HDHP that comes with it fits depends on your health care needs and savings.

Can I contribute to an HSA if I'm on Medicare?

No. Once you're enrolled in any part of Medicare, you can't make HSA contributions, though you can keep using the money already in the account. Because Part A can be backdated up to six months when you sign up after 65, Medicare.gov suggests stopping contributions six months before you retire and enroll.

Can I have an HSA with a marketplace bronze plan?

Since January 2026, yes, if you're otherwise eligible. The IRS treats bronze and catastrophic plans available through a marketplace exchange as high-deductible health plans for HSA purposes, even if they don't meet the usual deductible and out-of-pocket rules.

Next step

Health costs before Medicare can be one of the biggest lines in an early-retirement budget. Add a realistic yearly figure and see how it changes your number.

Work out your FIRE number →

uFIRE is for education only, not financial advice.