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HSA or PPO?

The benefits sheet lists premiums and deductibles. It doesn't add them up, count the employer's HSA money, or mention that the HSA's tax break is the best one in the tax code. This does, for every level of medical spending from a quiet year to a terrible one, so you can see exactly where each plan wins.

Start from

The plans on offer

At $2,500 of medical bills this year, the cheapest plan is

HDHP with HSA

It costs you $1,486 for the year, $1,014 less than PPO. HDHP with HSA is cheaper at every level of spending, from a quiet year to the worst one.
$2,500
What the year costs you, by how much care you use HDHP with HSAPPO
−$2,000−$1,000$0$1,000$2,000$3,000$4,000$5,000$0$5,000$10K$15K$20K$25KYour year: $2,500
$2,500 of care $1,486 HDHP with HSA ✓ $2,500 PPO

The bar along the bottom shows which plan is cheapest at each level of spending. Drag or click on the chart to move your year.

Where the money goes

For the yearHDHP with HSAPPO
Premiums, after the tax break$825 of $1,380$939 of $1,572
Care, at $2,500 of bills$2,500$1,561
Employer's HSA money−$690—
Tax saved by your HSA contribution at 30.9%−$1,148 on $3,710—
Your cost for the year$1,486$2,500
Worst case care at the out-of-pocket max$3,986$4,939

Or don't spend the HSA at all

Pay this year's bills from your checking account instead, and leave the HSA alone. $4,400 a year ($3,710 yours, $690 the employer's) at 7% from age 35 to 65 is $415,627, of which $132,000 was put in. Every dollar of it comes out tax-free for medical bills, now or in retirement, and after 65 for anything at all, taxed like a 401(k) withdrawal.

Where $3,710 of pay goes each yearInvested / yrAt 65After tax
HSA, spent on medical bills No tax going in, growing, or coming out$3,365$317,858$317,858
HSA, spent on anything after 65 Taxed on the way out, like a 401(k)$3,365$317,858$214,236
401(k) Skips income tax going in, but not FICA$3,426$323,640$218,133
Brokerage account Taxed going in and on the gains$2,217$209,394$187,960

The 401(k) and brokerage rows get the same $3,710 of gross pay, less the taxes each can't avoid. Retirement withdrawals are taxed at your income tax rate today, without FICA; brokerage gains at 15%. California taxes HSA contributions and earnings as ordinary income, which the HSA rows already lose.

About this tool

Who it's for
For employees choosing between a high-deductible plan with an HSA and a PPO at open enrollment.
What you can enter
Each plan's premium, deductible, coinsurance, copays, out-of-pocket max and employer HSA money, your coverage tier, wages and age, how much care you expect, and what you'd put in the HSA.
What it runs on
2026 IRS HSA and FSA limits and KFF Employer Health Benefits Survey premiums and deductibles. Sources and simplifications are under How this is calculated.
Who made it
Sam Wen, co-founder of Square. Free, no sign-up; it runs in your browser. Last updated .

Spot a mistake, or a rule that changed? Tell me.

Frequently asked questions

I'm healthy. Do I even need the fancy plan?

The fancy plan isn't the insurance; the out-of-pocket max is. Every plan here stops charging you at its cap, and that cap is the whole point of having coverage: a bad year costs the cap plus premiums, never more. Being healthy means you'll most likely land at the left of the chart, where the plan with the lowest premiums wins by the full premium gap. Check the worst-case row too. If the high-deductible plan's worst year is within a few hundred dollars of the PPO's, you're being paid a premium discount to take almost no extra risk.

We're having a baby next year. That's a PPO year, right?

Not necessarily. Prenatal care and a vaginal delivery run about $15,700 at employer-plan prices, and a C-section about $29,000, so you will hit the out-of-pocket max on either plan. That makes it a worst-case-row comparison: premiums plus the cap, less the HSA seed and tax break. The high-deductible plan often still wins, because the premium gap and the HSA money cover most of the gap in caps. One real trap: a pregnancy that starts in the fall spans two plan years, so you can pay two deductibles. Pick "Baby" on the slider and look at the family numbers.

Why does everyone say the HSA beats the 401(k)?

It's the only account with three tax breaks: contributions skip income tax, growth is untaxed, and withdrawals for medical bills are untaxed too. Through payroll it also skips the 7.65% FICA tax, which no 401(k) contribution does. After 65 you can spend it on anything, taxed like a traditional IRA, so the downside is a 401(k) and the upside is better. The limits are smaller ($4,400 single, $8,750 family, plus $1,000 from 55), and California and New Jersey tax the contributions anyway. Get your 401(k) match first, then fill the HSA, then the rest of the 401(k).

Should I spend the HSA or invest it?

If you can pay this year's bills from cash, invest it and keep the receipts. There's no deadline to reimburse yourself, so a bill from 2026 can be paid out of the HSA, tax-free, in 2056, after thirty years of growth. Most HSA providers let you invest once the balance passes a threshold, often $1,000; make sure yours does, and that it isn't sitting in cash earning nothing. Fidelity estimates a 65-year-old's remaining medical bills in the mid six figures, so there will be something to spend it on.

What's the catch with an FSA?

Use it or lose it. A health flexible spending account takes up to $3,400 of pay pre-tax in 2026, but what you don't spend by year end is forfeited, except for a carryover of at most $680 or a grace period of two and a half months, whichever your employer allows. So an FSA only works for bills you know are coming. It's also the main reason this page gives the PPO no tax break on its out-of-pocket costs: an FSA can provide one, if you guess right. You can't have a general-purpose FSA alongside an HSA, only a limited one for dental and vision.

I take an expensive prescription every month. Doesn’t that rule out the high-deductible plan?

It rules out guessing. A $400-a-month drug is $4,800 a year, which blows through the deductible by spring on the high-deductible plan and through a PPO's drug copays all year. Put your annual drug cost on the slider plus whatever else you expect and read the chart: once you're past the deductible, what matters is the gap in out-of-pocket maximums against the premium gap and HSA money. Two things to check on the plan sheet: whether the drug is on the formulary at all, and whether the HDHP covers it before the deductible. Since 2019 the IRS lets high-deductible plans cover insulin, statins, inhalers, blood pressure medication and a dozen other chronic-care items first-dollar, and many do.

Why can a plan cost less than nothing?

Because the employer is paying you to take it. A free high-deductible plan with a $1,500 HSA seed and a tax break on your own contributions hands you more money than the year's care costs, if the year is quiet. That's not a trick; it's the employer sharing the premium they saved. The chart shows it as a negative cost at low spending.

Not financial, tax or medical advice. Read the actual plan documents; the summary sheet leaves things out.

How this is calculated

The comparison

  • Spending is the allowed amount of in-network care you use in a year: what the bills add up to at the insurer's negotiated prices, before the plan pays its share. Preventive care is free on every plan and isn't counted.
  • What you pay for care is the deductible, then your coinsurance share, until the out-of-pocket max stops it. On a copay plan, office visits (priced at $150 each) cost the copay instead and skip the deductible; on other plans their price counts like any other bill. Everything else, including prescriptions, is treated as deductible-then-coinsurance.
  • Premiums come out of pay before tax under a Section 125 plan, as at nearly every employer, so their real cost is the premium times one minus your marginal rate.
  • The HSA adds the employer's contribution and the tax you save on your own, both of which you keep whether you spend the account or invest it. Your contribution is capped at the 2026 limit ($4,400 single, $8,750 family, $1,000 more from 55) less the employer's share. The HSA money itself isn't counted as a cost or a saving; it's yours either way.
  • Your cost for the year is premiums after tax, plus care, less the employer's HSA money and your HSA tax savings. The crossover points are exact: every plan's cost is a straight line between the points where its deductible, visits or cap kick in, so the lines are solved pairwise between them.
  • Marginal rates are the tax on your next $100 of wages by the tax map's engine for 2026: federal income tax, FICA (7.6% below the Social Security wage base), state income tax and state payroll programs, at your filing status with the standard deduction. California and New Jersey tax HSA contributions, so the HSA's rate leaves state income tax out there.

Data and simplifications

  • The sample plans use KFF's 2025 Employer Health Benefits Survey: PPO premiums of $9,818 single and $28,272 family, HDHP/HSA premiums of $8,620 and $25,379, with the all-plan worker shares (16% and 26%) applied; single deductibles of $1,337 (PPO) and $2,609 (HDHP), doubled for family; a $27 primary care copay; 20% coinsurance; and employer HSA contributions of $690 single and $1,296 family. KFF reports out-of-pocket maximums as a distribution, so the sample caps are typical values, not averages.
  • Family deductibles are treated as aggregate (one pool for the household). Many plans embed a per-person deductible inside the family one, which lowers the cost of a year where one person is sick.
  • No out-of-network care, balance billing, or separate drug deductibles. Copays other than office visits (emergency room, specialists, prescriptions) are folded into coinsurance.
  • The PPO gets no tax break on its out-of-pocket costs. A health FSA can provide one, up to $3,400 in 2026, for the bills you predict correctly.
  • Investing the HSA assumes a steady return and that contributions and limits stay flat in today's dollars. Retirement withdrawals are taxed at today's income tax rate without FICA.
  • This is a planning estimate, not financial, tax or medical advice.

Sources