The Big Three Medical Plans, Decoded

Most mid-size and larger employers narrow your medical choices down to three basic structures. Here’s the short version of each.

HMO: Lower Cost, Narrower Lane

You’ll pick from an in-network list of doctors, and you’ll typically need a referral from your primary care physician before seeing a specialist. In exchange for that structure, premiums run lower. This tends to suit people who are healthy, don’t expect frequent specialist visits, and would rather not think much about healthcare costs during the year.

PPO: More Freedom, Higher Price Tag

A PPO removes most of the referral hassle and widens your network, but you pay for that freedom. Before enrolling, confirm your regular doctors are actually in-network; out-of-network care usually costs meaningfully more. Read the deductible carefully, too. Many PPOs require you to pay the full negotiated rate for certain services, a specialist visit, for example, until you’ve hit your deductible. After that, insurance typically covers around 80%. Families should also check whether there’s a separate per-person deductible layered on top of the family deductible.

HDHP + HSA: Built for People Who Want to Invest, Not Just Spend

A High Deductible Health Plan usually carries the lowest premium of the three. But with that low premium comes high deductibles, hence the name. While coverage is predictable, out of pocket costs – not so much. And if that worries you, this probably isn’t the plan for you. But for the right people – healthy with an eye toward long-term investing – this plan can be wonderful. The reason: it’s the only plan type that unlocks a Health Savings Account (HSA), arguably the best tax-advantaged account available to most workers. Contributions go in pre-tax, grow tax-free, and come out tax-free for qualified medical expenses, a rare trifecta.

The smartest way to use an HSA is to treat it like a retirement account, i.e. invest the funds and let them compound instead of spending them on routine expenses. Unused balances roll over indefinitely and follow you if you switch jobs. For the 2027 plan year, you can contribute up to:

• $4,500 for self-only coverage
• $9,000 for family coverage
• An extra $1,000 if you’re 55 or older (each spouse can claim an additional $1000 so long as each have an HSA account)

These limits include whatever your employer contributes, and many employers do contribute as an incentive to pick this plan. However, there is a trade-off. Until you hit your deductible, you’re generally paying full price for care, so it’s smart to budget as if you’ll get there.

The Benefits People Forget to Reconsider

Life and disability insurance rarely get a second look once you’ve enrolled once, but both are worth revisiting every year, especially if your circumstances have shifted.

Life insurance through your employer is often your cheapest option. Many employers provide coverage equal to 1x your salary at no cost, and supplemental coverage is usually available at a group rate. However, coverage only lasts while you work for the company. If you leave the company, ask about portability before you lose the policy. If portability becomes a problem, securing a private policy may be in order.

Disability insurance is the benefit almost everyone underrates, and statistically, the one most of us are more likely to use. Purchasing this through your employer can be economical. On the flip side, a private policy, which usually costs significantly more, may offer more robust coverage and is portable, i.e. follows you from job to job so long as premiums are paid.

For both products, medical exams are usually waived when you first joined your employer, however, if this comes during open enrollment or if you choose a high coverage level then medical exams may be required.

Small Accounts, Real Savings

A handful of smaller benefits rarely get much attention but can meaningfully lower your tax bill: commuter benefits, dependent care accounts, flexible spending accounts (FSAs), and employer-funded Health Reimbursement Arrangements (HRAs). Each works a little differently, but the common thread is the same, pre-tax dollars covering costs you’re already paying. If you haven’t looked at these in a while, it’s worth a few minutes during enrollment to see what’s changed.

Clarifying the Differences – HSA vs FSA

Many employees confuse the FSA and the HSA, which is completely understandable since they serve similar functions – paying for out of pocket medical expenses. But they diverge in a few important ways. An HSA is yours to keep, unused funds roll over indefinitely and follow you if you change jobs, while an FSA is generally use-it-or-lose-it and stays with your employer. HSAs also require HDHP enrollment and let you invest the funds for tax-free growth, whereas FSAs work with most health plans, but funds typically just sit as cash.  If you elect an FSA, the full election amount is available to you to spend at the start of the year.  You do not have to fully “fund” the account before accessing your election dollars.  If you spend your full election and leave your employer partway through the year, that is a loss that they bear; you do not have to reimburse.

Your Two-Question Gut Check

Before you submit your elections, ask yourself two things 1) has anything changed in your health, family, or income this year? And 2) am I choosing this plan because it’s genuinely the best fit, or because it’s what I picked last time? If either of those are a “yes” then it’s worth spending a few more minutes comparing.

We’re glad to walk through your specific options, book a meeting with your EnvestAM advisor anytime.