What you are actually comparing at open enrollment
Two plans on the same benefits menu are two different bets on how much care you will use. The high-deductible plan charges you less every month and more when you show up. The PPO does the reverse. Neither is the cheap one; each is the cheap one over a different range of medical spending, and the whole job is to find the level where they cross and then decide which side of it you expect to land on.
Four quantities decide it. Your premium is the certain cost, paid whether you use the plan or not. Your cost sharing is the uncertain cost, driven by the deductible, the coinsurance percentage and the out-of-pocket maximum that caps it. The employer HSA contribution, if there is one, is a direct transfer that only the HDHP gives you. And the tax deduction on your own HSA contribution is a genuine reduction in what the year costs, because that money would otherwise have been taxed.
People compare the first quantity, glance at the second, and ignore the last two entirely. That is why HDHPs are so often dismissed as the risky option when the arithmetic says otherwise: a $500 employer deposit and a $1,500 contribution at a 30% combined rate are worth $950 before a single claim is filed, which is more than five months of a $180 premium.
The plan design terms here are defined by federal rule. A plan only counts as HSA-qualified — meaning you may contribute to a health savings account at all — if it meets the minimum deductible and maximum out-of-pocket figures the IRS publishes each year under Rev. Proc. This calculator checks your figures against the 2025 set and warns you if they do not fit.
The cost-sharing formula and why it bends twice
Your share of a year's medical charges is a piecewise function with two kinks. Below the deductible you pay everything: your cost equals the charges. Between the deductible and the point where you hit the cap, you pay the deductible plus your coinsurance percentage of everything above it, so your cost rises at the coinsurance rate rather than at full speed. Above that point you pay nothing more at all.
Written out: cost sharing = min(M, min(D, C) + c · max(0, C − D)), where C is allowed charges, D the deductible, c your coinsurance share and M the out-of-pocket maximum. The charge level at which you reach the cap is D + (M − D) ÷ c, which is worth computing for both plans: it is the point beyond which extra sickness costs you nothing more, and it is often far higher than people assume. With a $3,500 deductible, 20% coinsurance and a $7,000 cap, you need $21,000 of allowed charges before the cap binds.
Add 12 months of premium and subtract the HSA credits, and you have the net cost. The subtraction is where people go wrong in both directions. Subtracting your own HSA contribution in full is too generous — that money is still yours, sitting in an account. Subtracting nothing is too harsh — the contribution escapes federal income tax, state income tax in most states, and, if made through payroll, the 7.65% FICA charge too. Only the tax saved belongs in the comparison.
Because both cost curves are piecewise linear and both eventually flatten, the difference between them is also piecewise linear. Over any stretch where both plans are in their coinsurance phase and neither has capped, the difference is constant — the two curves run parallel. That is why a break-even often does not sit where intuition puts it, and why it sometimes does not exist at all. This calculator scans the whole range rather than solving a single algebraic expression, so it finds the crossing wherever it falls and reports nothing when there is none.
Worked example: a family choosing between $180 and $320 a month
Your employer offers an HDHP at $180 a month with a $3,500 family deductible, 20% coinsurance and a $7,000 out-of-pocket maximum, and puts $500 into your HSA. The PPO is $320 a month with a $1,000 deductible, 20% coinsurance and a $4,000 maximum. You expect $6,000 of allowed charges, you will contribute $1,500 to the HSA yourself, and your combined marginal rate including FICA is 30%.
- HDHP premium. $180 × 12 = $2,160.
- HDHP cost sharing on $6,000. You pay the first $3,500 in full. Of the remaining $2,500 you pay 20%, which is $500. Total $3,500 + $500 = $4,000, well under the $7,000 cap.
- HSA credits. The employer deposit is $500. The tax saved on your own $1,500 is $1,500 × 0.30 = $450. Together $950.
- HDHP net. $2,160 + $4,000 − $950 = $5,210.
- PPO premium. $320 × 12 = $3,840.
- PPO cost sharing on $6,000. $1,000 in full, then 20% of $5,000 = $1,000. Total $2,000.
- PPO net. $3,840 + $2,000 = $5,840.
- Difference. $5,840 − $5,210 = $630 in favour of the HDHP.
Now the worst case. The HDHP caps your cost sharing at $7,000, so the bad year costs $2,160 + $7,000 − $950 = $8,210. The PPO caps at $4,000, so its bad year is $3,840 + $4,000 = $7,840. The PPO is $370 better when everything goes wrong.
Where do they tie? Between $16,000 and $21,000 of charges the PPO has already capped at $4,000 while the HDHP is still paying coinsurance, so the HDHP's cost sharing is 2,800 + 0.2C. Setting the difference in cost sharing equal to the $2,630 fixed-cost advantage gives 2,800 + 0.2C − 4,000 = 2,630, so 0.2C = 3,830 and C = $19,150. Check it: HDHP cost sharing is 2,800 + 3,830 = $6,630, so $2,160 + $6,630 − $950 = $7,840, exactly the PPO's $3,840 + $4,000. Below $19,150 of allowed charges the HDHP wins; above it the PPO does.
How to read the break-even and the worst case together
The break-even figure is the whole decision compressed into one number, but it only helps if you can place yourself against it honestly. Look up last year's explanation-of-benefits statements and add the allowed amounts, not what you paid and not what the provider billed. Most households land far below their own guess in an ordinary year and far above it in the year something happens.
Then read the worst case. The gap between the two worst-case figures — $370 in the example above — is the size of the risk you take by choosing the HDHP. It is usually much smaller than people expect, because the out-of-pocket maximum caps it by design. If the HSA balance you will build exceeds that gap, the risk is already funded and the choice becomes arithmetic rather than nerve.
Three situations shift the answer away from what the numbers alone suggest. A planned expensive event — a birth, a scheduled surgery, a new specialty drug — makes the high-claim side of the curve the relevant one, and it is the one case where you genuinely can forecast. Cash flow matters if you could not absorb a $7,000 bill in January; the annual totals say the HDHP is cheaper while your bank account says you cannot afford to find out. And a chronically ill family member puts you above the cap most years, at which point the HDHP's lower premium is competing against a cost-sharing gap you will hit every single year.
If you want the tax side examined properly rather than as a single credit, the HSA triple tax advantage calculator follows the money through deduction, growth and withdrawal. To see what one specific procedure costs under each design, use the deductible and coinsurance calculator, and for the ceiling on a bad year, the out-of-pocket maximum calculator.
IRS limits that define an HSA-qualified high-deductible plan
| Parameter | Self-only | Family |
|---|---|---|
| Minimum annual deductible for HDHP status | $1,650 | $3,300 |
| Maximum out-of-pocket for HDHP status | $8,300 | $16,600 |
| Maximum HSA contribution (employer and employee combined) | $4,300 | $8,550 |
| Additional catch-up contribution from age 55 | $1,000 | $1,000 |
A plan below the minimum deductible is not HSA-qualified no matter what the employer calls it, and a plan above the maximum out-of-pocket is not either. The ACA sets a separate, higher out-of-pocket ceiling that applies to all non-grandfathered plans, so a plan can satisfy the ACA and still fail the HSA test.
Assumptions this calculator makes, and where they break
- Everything is in network. Out-of-network charges usually run against a separate, much higher deductible and out-of-pocket maximum, and balance billing above the allowed amount may not count toward either. A single out-of-network episode can make both totals meaningless.
- Coinsurance is a single percentage. Real plans layer copays for office visits and drugs on top, and copays often bypass the deductible while still counting toward the out-of-pocket maximum. If your plan is copay-heavy, model your expected copays as part of the charges and expect the estimate to be rough.
- The family deductible is treated as a single pot. Many PPOs use embedded individual deductibles inside the family deductible, so one person can start receiving benefits before the family figure is met. Embedded designs shift cost sharing down and favour the plan that uses them.
- The HSA tax saving is credited in the year of contribution. That is correct for the deduction, but it undercounts the account: money left invested grows tax-free and comes out tax-free for medical costs, which is worth more than the first-year deduction alone.
- Premiums are pre-tax under a Section 125 plan for both. If one plan is offered post-tax and the other pre-tax, the comparison is skewed by your marginal rate and you should compare after-tax premiums directly.
- No FSA is modelled on the PPO side. A health FSA gives the PPO its own tax break on cost sharing. If you would fund one, reduce the PPO's cost-sharing figure by the tax you would save on it before comparing.
The HSA is the part that outlives the plan year
Every other quantity in this comparison is spent by December. The HSA is not: it has no use-it-or-lose-it rule, it stays yours when you change jobs or plans, and after age 65 it may be withdrawn for any purpose at ordinary income rates like a traditional IRA, or tax-free for medical costs including Medicare premiums. If you can pay current medical bills from cash flow and leave the account invested, the account is doing something a PPO's lower deductible can never do. That is a genuine reason to weight the HDHP more heavily than a single year's arithmetic suggests — but only if you actually leave the money in.
Where this comparison sits among the others
This calculator answers one question: which of two plans on the same menu costs less across a range of medical spending. Several neighbouring questions need different tools.
If you are comparing plans for a household where different members will use care very differently, run the calculation once for each realistic scenario rather than once on an average. Averages are misleading here precisely because the cost curve bends: the cost of a $2,000 year and a $30,000 year averaged together is not the cost of a $16,000 year.
If you have just left a job, the choice is not between two employer plans but between COBRA, a spouse's plan and the exchange. The COBRA premium calculator prices continuation coverage, and the premium tax credit calculator prices the subsidised alternative. Note that the deductible you have already met this year does not transfer to a new plan, which is a cost this calculator does not see.
If you want a single plan costed in detail rather than two plans ranked, the health plan total cost calculator takes one design and works through it. And if the real question is how much cash you should hold against a bad year rather than which plan to pick, size the reserve from the worst-case figure here — premiums plus the out-of-pocket maximum — not from the expected figure.