What is the Difference Between an HSA and EPO Health Plan?

When it comes time to choose a health insurance plan, you’ll likely come across acronyms like HSA and EPO. These stand for Health Savings Account and Exclusive Provider Organization. They are two common types of health plans that have some key differences.

In this comprehensive guide, we’ll explain what you need to know about HSA and EPO plans. We’ll cover:

• What is an HSA?
• What is an EPO?
• How HSAs and EPOs compare on costs, provider choice, and more
• Who might benefit most from an HSA vs EPO
• Pros and cons of each type of plan

Let’s start by looking at what defines these two plan types.

What is an HSA Health Plan?

An HSA, or Health Savings Account, is a tax-advantaged medical savings account. It’s paired with a high deductible health plan (HDHP).

Here are some key things to know about HSA plans:

• Tax-advantaged account: You can contribute pre-tax or tax-deductible dollars to your HSA. The money grows tax-free and can be withdrawn tax-free for qualified medical expenses.

• Must have an HDHP: To contribute to an HSA, you must be enrolled in a qualified high deductible health plan. For 2023, the IRS defines a qualified HDHP as one with a minimum deductible of $1,500 for individual coverage or $3,000 for family coverage.

• Pay first before coverage: The deductible on an HDHP is higher than a traditional health plan. You pay out-of-pocket for most services until you reach your deductible. Preventive care is often covered at no cost before the deductible.

• Use HSA for expenses: You can use funds in your HSA account to pay for deductibles, copays, coinsurance, prescriptions, dental care, vision care and more.

• Funds roll over: Any unused money in your HSA rolls over year to year. The account is yours to keep and use even if you change health plans or jobs.

• Can invest funds: Once your HSA balance reaches a certain amount, you can invest funds for added tax-free growth potential.

What is an EPO Health Plan?

An EPO, or Exclusive Provider Organization plan, is a managed care plan. Here are the main features:

• Limited network: An EPO only covers in-network providers. There are exceptions for emergency care.

• No referrals required: You don’t need a referral from a primary care doctor to see specialists.

• Copays and coinsurance: You’ll have copayments or coinsurance for services after you meet your annual deductible.

• No out-of-network coverage: If you see an out-of-network provider except for emergency care, the EPO plan will not pay any portion of the cost.

The EPO network is more limited than a PPO plan but not as narrow as an HMO. The tradeoff for access to a limited network is that premiums are often lower than a broader PPO network plan.

So in short, an EPO offers a middle ground between HMO and PPO plans. You have more provider choice than an HMO but pay less than a PPO.

Now that we’ve defined these two plan types, how do they compare?

How HSA and EPO Plans Compare

HSA and EPO plans have some big differences when it comes to costs, provider choice, and how they work. Let’s compare them across several factors:

Provider Network Size

• HSA: Most HSA plans utilize broad PPO networks that offer access to a large number of healthcare providers.

• EPO: Has a more limited network than PPO plans in exchange for lower premiums. The network is larger than an HMO plan.

Premiums

• HSA: Tend to have lower monthly premiums than traditional plans because of the high deductible.

• EPO: Also have relatively low monthly premiums compared to PPOs due to the narrower network. Premiums will likely be a bit higher than an HSA plan.

Deductibles

• HSA: Will have a high deductible, often $1,500 – $3,000+ per person or more for family coverage. You pay the full cost out-of-pocket until meeting the deductible.

• EPO: Tend to have lower deductibles than an HSA/HDHP plan. May be anywhere from $500 – $1000+ per person.

Out-of-pocket Maximums

• HSA: Has defined limits on your total out-of-pocket costs for the year. For 2023, the max is $7,500 for individual coverage and $15,000 for families.

• EPO: Also caps your total out-of-pocket costs for medical care. The limits may be lower than the IRS defined amounts for HSA qualified plans.

Tax Benefits

• HSA: Lets you contribute pre-tax or tax-deductible funds and earn tax-free growth on investments. HSAs offer unique triple tax benefits.

• EPO: Does not come with access to the tax-advantaged features of the HSA.

How You Pay for Care

• HSA: You pay 100% out-of-pocket until you meet your deductible. After that, you pay coinsurance until meeting your out-of-pocket max.

• EPO: You pay copays or coinsurance for services after meeting your annual deductible. Costs are often lower than an HSA plan for the same services.

Choosing Providers

• HSA: Can see any provider but will pay less if you stay in-network. Referrals not required.

• EPO: Must use doctors and facilities in the EPO network (except emergencies) or pay full cost out-of-network. No referrals required.

Prescription Drug Coverage

• HSA: You typically pay 100% until meeting your deductible. After that, you’ll pay discounted rates.

• EPO: Most EPO plans provide coverage for prescriptions right away with copay tiers (e.g. $10/$35/$60) once your premium is paid. The deductible may or may not apply.

Health Account

• HSA: Comes with the HSA that lets you save and pay for care tax-free. Funds roll over year to year.

• EPO: Does not come with access to the unique HSA medical savings account.

As you can see, these two plans take very different approaches to providing healthcare coverage. Generally, an HSA plan will cost less per month but you’ll pay more upfront for care until meeting your deductible. An EPO has higher premiums but lower out-of-pocket costs at the point of care.

Next, let’s look at the pros and cons of each plan type.

Pros and Cons of HSA Plans

Pros

• Lower monthly premiums
• Tax-advantaged HSA savings and investment account
• Large provider network with PPO plans
• Funds roll over year to year

Cons

• Higher deductibles mean you pay more upfront before coverage
• Must have qualifying HDHP to enroll and contribute to HSA
• Can’t participate if enrolled in other coverage like Medicare
• More complexity managing HSA account and health plan

Pros and Cons of EPO Plans

Pros

• No referrals required to see specialists
• Lowers premiums due to limited provider network
• Copays and coinsurance often less than HSA for same services
• Lower deductibles than HSA plans

Cons

• No out-of-network coverage except emergencies
• No access to tax-advantaged HSA account
• More limited provider network than PPO plans

Who is Best Suited for an HSA vs EPO?

Understanding the differences between these two types of health plans is crucial for choosing what fits your needs best. Here are some things to consider:

An HSA may make more sense if:

• You want to open and contribute to an HSA.
• You are generally healthy with limited medical expenses.
• You want lower premiums and can afford the high deductible.
• You like the freedom of larger PPO networks.

An EPO may be better if:

• You value copays and coinsurance over deductibles.
• You don’t need extensive provider choice beyond an EPO network.
• You want some cost savings but not as high of a deductible as an HSA plan.
• You don’t qualify for or want to manage an HSA.

In general, those