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PPO vs. HMO vs. HDHP/HSA: How to Explain the Differences

Ross Simons

Ross Simons

Director of Inbound Marketing
hmo ppo hdhp how to explain differences

Pop quiz: What’s the difference between a PPO and an HMO? How does an HDHP work, and what does it have to do with an HSA?

Easy, right? If you’re an HR professional, you probably rattled off the answers without even thinking. You know this stuff inside and out.

Besides, you answer these questions every day — at least during open enrollment season, when employees come to you to help sort out their confusion. And, yet, despite your best efforts to educate your employees, it can sometimes seem like they’re not learning anything.

According to a 2021 Voya Financial survey:

  • 35% of employees say they do not fully understand their benefits.
  • 54% of millennial employees (meaning younger people who have had less personal healthcare experience) say they do not understand their benefits.

These statistics help explain some of our own findings.

In our recent playbook, “The Six Most Common Challenges With Open Enrollment,” we reported that HR teams are frustrated with having to answer the same questions repeatedly. Compounding the frustration, employees miss their enrollment deadlines and fail to grasp the value of benefit options such as HDHPs.

Think About It from the Employee Perspective

It’s very common to know so much about a subject that we forget how confusing the subject can be to people with different areas of expertise. Case in point: HDHPs.

As an HR professional, you know that high-deductible health plans (HDHPs) coupled with health savings accounts (HSAs) can offer the best level of coverage at the most reasonable cost for many — if not most — employees. High HDHP adoption can also help your organization control healthcare costs.

So, why do employees keep enrolling in plans that offer more coverage than they need for higher premiums?

Part of the problem is branding. The term “high-deductible” does not exactly have a positive connotation to most people.

Related: An Email Template to Educate Employees on HDHPs/HSAs. Read it here →

Another issue is intimidation. HSA and HDHP are confusing abbreviations used to describe unfamiliar concepts. Many employees would rather stick with the plans they understand than invest their time learning about a new type of health plan.

(67% of employees say that reading about their benefits is complicated, intimidating, or stressful; 40% would rather do three hours of hot yoga than research their benefit options.)

It’s also not safe to assume that your employees understand more conventional health plans, such as PPOs and HMOs or their components. A 2019 Policygenius survey found that less than one out of every three respondents was able to correctly define all three of the terms “copay,” “deductible,” and “premium.”

Bridging the Benefits Information Gap: 3 Strategies

How can you help your employees gain the knowledge they need to make better decisions during open enrollment (besides holding the same presentations over and over again)? Here are three effective educational strategies:

1. Write Clear, Focused Emails

According to some estimates, the average white-collar employee receives as many as 121 emails per day and spends up to five hours reading and responding to work and personal emails.

That’s a lot of noise to overcome. But it’s still possible to break through with clear, concise, and relevant messaging.

Again, the key is to put yourself in employees’ shoes to provide the information they’re looking for without getting bogged down in insider jargon. Employees will take the time to read messages that answer their questions using straightforward language.

What is a high-deductible health plan (HDHP)?

It’s exactly what it sounds like. It’s a plan with a higher deductible, which means that, depending on the type of services, you may have to spend more on medical care until you surpass your deductible. However, that doesn’t mean your overall healthcare costs for the year will be higher; in fact, they may actually be lower.

                                               Excerpt from An Email Template to Educate Your Employees on HDHPs and HSAs

The email goes on to list the benefits and drawbacks of an HDHP using brief, readable bullet points.

(Find more pre-written emails, including an HSA email template, in our free templates archive.)


Get even more like this in our Open Enrollment Toolkit

Download our Open Enrollment Toolkit to get a free employee video, plus four other freebies: our OE Playbook, our OE Trends Report, three email templates, and
an action plan & timeline.

2. Educate Year-Round

Employees find open enrollment season just as overwhelming and stressful as HR teams do. After all, they only have a few weeks to learn about all their options and make selections they’ll be stuck with for an entire year.

If you’ve ever crammed for a test the night before only to forget everything as soon as the test was over, you know how short bursts of learning rarely lead to long-term knowledge retention. You can give your employees the time and space they need to master difficult healthcare topics by educating employees year-round, not just during open enrollment.

Year-round communication also helps keep benefits top of mind for employees, which encourages usage. We suggest connecting with your employees at least once a month to share tips and explanations for benefits they may find useful that month.

For example, as the April tax deadline approaches, you can remind your employees about tax-free HSA benefits. (Discover more monthly topic ideas in our free 2022 Benefits Communications Calendar.)

3. Offer a Decision-Support Tool

The best decision-support tools reduce the strain on your HR team while speedily guiding employees to the best healthcare options for their situations.

The highly rated PLANselect decision-support tool, for example, asks users to answer four key questions. PLANselect can break down an employee’s plan options in a matter of minutes, make cost estimates, and recommend the best plan for the employee’s needs.

By translating benefit options into numbers employees can understand and apply directly to their lives, PLANselect helps employees feel more confident switching to less familiar plan types, such as HDHPs.

(On average, 15 to 25% of employees opt for HDHPs and FSAs after using PLANselect.)

Learn more about decision-support tools — including the seven critical questions to ask to find the right decision-support tool for your organization — with our free guide, “Your Secret Weapon for Reducing Healthcare Spending.”

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