# HDHP vs. copay plan: which is better for employees?

Source: https://www.getprescience.com/guides/hdhp-vs-copay-plan
Author: Aditya Jain, MD, Cofounder and COO, Prescience
Published: 2026-10-27
Updated: 2026-10-27
Cite as: Aditya Jain, MD. "HDHP vs. copay plan: which is better for employees?." Prescience, October 27, 2026. https://www.getprescience.com/guides/hdhp-vs-copay-plan

An HSA-qualified high-deductible health plan can offer lower premiums and tax-advantaged saving, while a copay plan may make routine visits more predictable. Neither design wins for every employee. I compare annual premiums, employer contributions, covered services, cash needed early in the year and out-of-pocket limits using the same network and enrollment assumptions.

- **2026 HDHP minimum deductible:** $1,700 / $3,400
- **2026 HSA limit:** $4,400 / $8,750
- **Workers in HDHP with savings option:** 33% (KFF, 2025)
- **Prescience plans:** Effective $0 deductible

## Side by side

**HDHP vs. a traditional copay plan**

|  | HDHP | Copay plan |
| --- | --- | --- |
| Monthly premium | May be lower; compare actual quotes | May be higher; compare actual quotes |
| Average single premium at employers, 2025 (KFF) | $8,620 a year ($718/month) | PPO average: $9,818 a year ($818/month) |
| Deductible | At least $1,700 / $3,400 in 2026 | Often lower, sometimes none for visits |
| Average single deductible, 2025 (KFF) | $2,609 | PPO average: $1,337 |
| Office visit | Usually negotiated price before deductible; permitted exceptions apply | Flat copay (KFF average: $27 primary care, $45 specialist) |
| Preventive care | Covered before the deductible | Covered before the deductible |
| Out-of-pocket maximum, 2026 legal ceiling | $8,500 / $17,000 | $10,600 / $21,200 |
| Conventional HDHP / ACA ceiling, 2026 | Yes | No |
| HSA contributions | Only if plan and individual eligibility rules are met | Generally unavailable for conventional first-dollar medical coverage; statutory exceptions apply |

"Copay plan" here means a plan where most common services have a flat copay and the deductible is low or doesn't apply to visits. Many PPOs work this way; HMOs can too. An HDHP can sit on any network, so the comparison is about cost sharing, not doctors. See [HMO vs. PPO vs. EPO](https://www.getprescience.com/guides/hmo-vs-ppo-vs-epo) for networks.

KFF's HDHP/SO and PPO categories describe survey groups, not otherwise identical competing quotes. A PPO can also use an HSA-qualified design. The difference between the survey averages therefore cannot establish your employer's savings or the best plan for any particular employee.

## The 2026 HDHP and HSA rules

**HSA and HDHP limits for 2026 (IRS Rev. Proc. 2025-19)**

|  | Self-only | Family |
| --- | --- | --- |
| Minimum HDHP deductible | $1,700 | $3,400 |
| Maximum HDHP out-of-pocket | $8,500 | $17,000 |
| HSA contribution limit (employer + employee) | $4,400 | $8,750 |
| Extra catch-up contribution, age 55+ | $1,000 | $1,000 |

- **Telehealth before the deductible** is now permanently allowed without losing HSA eligibility, for plan years starting in 2025 or later.
- **Individual-market bronze and catastrophic coverage:** qualifying coverage is treated as HSA-compatible from 2026 under IRS Notice 2026-5, including specified off-Exchange situations. The change does not automatically qualify every employer bronze plan.
- **Direct primary care:** qualifying arrangements can preserve HSA contribution eligibility in 2026 when aggregate monthly fees stay within $150 for one person or $300 for more than one. Eligible fees may be paid from an HSA; service and payment restrictions apply.
- **Preventive care,** including many screenings and some chronic-condition medicines on the IRS list, can be covered before the deductible.

## Four years in one employee's life, on each plan

These are fictional plan designs, not actual quotes. The company pays the entire premium in both cases. A $100 monthly premium difference saves $1,200 per employee annually; after a $1,000 employer HSA deposit, its saving is $200, before fees. Assume a full upfront HSA deposit and full-year eligibility.

- **HDHP:** $718 a month, $2,000 deductible, then 20% coinsurance, $5,000 out-of-pocket maximum, $1,000 employer HSA deposit.
- **Copay plan:** $818 a month, $30 primary care, $40 therapy and $10 generic drug copays, $350 ER copay, $500 deductible then 20% for imaging and hospital care, $4,000 out-of-pocket maximum. Physical therapy is $40 per visit. The ER copay replaces all other cost sharing for the illustrated ER claim.

**Illustrative employee spending and unused HSA value; each scenario is separate**

| Year | HDHP | Copay plan | Better for the employee |
| --- | --- | --- | --- |
| Healthy: a physical, 2 sick visits ($150 each), a generic prescription ($15/month) | $480 paid from the HSA; $520 left over | $180 ($60 visits + $120 drug copays) | HDHP has $700 more combined cash/account value; it is not $700 less in claim payments |
| One ER visit (allowed amount $2,500) | $2,100, or $1,100 after the HSA deposit | $350 | Copay plan, by $750 |
| Knee MRI ($3,000) + 10 physical therapy visits ($120 each) | $2,440, or $1,440 after the HSA deposit | $1,400 ($1,000 MRI + $400 PT) | About even |
| High-cost covered episode ($20,416 assumed allowed claims) | $5,000 maximum, or $4,000 after the HSA deposit | $4,000 maximum | Even |

**The ER line, step by step**

Broken wrist, in-network ER, allowed amount $2,500. Nothing spent yet this year.

- HDHP: deductible: $2,000
- HDHP: 20% of the remaining $500: $100
- HDHP: paid from the $1,000 employer HSA deposit: –$1,000
- HDHP: employee's own money: $1,100
- Copay plan: ER copay: $350

Under these specific assumptions, the employee pays $750 less on the copay plan. A different premium contribution, HSA deposit, ER benefit or remaining deductible could reverse the comparison. This does not predict results for a workforce.

The table separates a quiet year, moderate bills and a high-cost year. It is a decision aid, not a general rule that one design always wins in each category. I would also calculate annual employee premiums plus the applicable maximum, less employer account contributions, for covered in-network care. Exclusions and out-of-network bills remain additional exposure.

## What the HSA is really worth

Under federal rules, eligible HSA contributions receive favorable income-tax treatment, earnings can grow tax-free, and withdrawals for qualified medical expenses can be tax-free. Contributions through a Section 125 cafeteria plan can also avoid payroll tax. State treatment can differ. Unused balances carry over and remain the employee's after leaving the company.

**Tax saved on a $2,000 employee contribution (illustrative)**

Illustrative eligible employee in the 22% federal bracket, contributing through a Section 125 payroll arrangement. Assume wages remain below the Social Security wage base and no Additional Medicare Tax effect. Ignore state taxes.

- Federal income tax saved (22%): $440
- Social Security and Medicare saved (7.65%): $153
- Employee saves: $593
- Company payroll tax saved (7.65%): $153

Valuable for people with spare cash. Less useful for an employee who lives paycheck to paycheck and can't fund the account before a bill arrives.

## Who each plan suits

- **Consider an HDHP:** when actual premium savings and employer HSA deposits compensate for cost sharing, and the employee can handle the early-year bill.
- **Consider a copay plan:** when its actual benefits make recurring services affordable and its premium is sustainable. Compare medicines, therapy and specialist costs individually.
- **Either, after comparing employer funding:** an employer HSA deposit can reduce the cash an employee needs to supply, but does not change the insurance deductible. KFF found that 3% of workers with single coverage in HSA-qualified HDHPs received an employer contribution at least as large as their deductible. Check deposit timing as well as the annual amount.

The problem is that employers can't pick plans person by person, and people don't know in January whether they'll need surgery in June. Offering both side by side is common; see [offering two health plans](https://www.getprescience.com/guides/two-health-insurance-plans).

## Two ways to close the deductible gap

Employers who like the HDHP's lower premium but not its effect on sick employees can fund part of the deductible. There are two tools, and they behave differently.

**HSA deposit vs. HRA for funding the deductible**

|  | Employer HSA deposit | HRA paired with the plan |
| --- | --- | --- |
| When the company pays | On the contribution schedule, regardless of claims | Only when an employee has a bill |
| Who owns the money | The employee, permanently | The company; unused money stays with it |
| Keeps HSA eligibility | Yes | Only if the HRA is limited (for example, post-deductible or dental and vision) |
| Average 2025 employer contribution (KFF) | $690 single | $1,966 single |
| Best for | Recruiting, long-tenure teams, people who save | Keeping cost low while protecting the employees who get sick |

**HDHP plus an HRA for the first $1,500 of the deductible (illustrative)**

Fictional alternative that is not HSA-compatible. Ten single employees; assume $100 monthly premium savings each. An HRA pays the first $1,500 of a $2,000 deductible. Three employees use the full allowance and the other seven use none. Ignore administration fees.

- Premium saving, 10 × $100 × 12: $12,000
- HRA payments, 3 × $1,500: –$4,500
- Company saves: $7,500
- Most an employee pays before coinsurance: $500

The illustrated saving is $7,500 before fees. If all ten use the allowance, reimbursements total $15,000 and exceed the $12,000 premium saving by $3,000. This first-dollar general medical HRA blocks HSA contributions; it cannot preserve eligibility merely by keeping the HDHP name.

## HSA traps employees and employers hit

- **Medicare.** Once an employee enrolls in any part of Medicare, including Part A, they can't contribute to an HSA. See [employer health insurance and Medicare](https://www.getprescience.com/guides/employer-health-insurance-and-medicare).
- **A spouse's health FSA.** If a spouse has a general-purpose health FSA that can pay the employee's bills, the employee isn't HSA-eligible. A limited-purpose (dental and vision) FSA is fine.
- **Other coverage.** Being covered by a non-HDHP plan, such as a spouse's copay plan, also ends eligibility.
- **Mid-year enrollment.** Contribution limits are prorated by month unless the employee uses the last-month rule, which requires staying HSA-eligible for the next full year.
- **Family deductibles.** Conventional HSA-qualified family coverage generally cannot pay non-exempt benefits before the $3,400 family minimum in 2026. Individual-market bronze and catastrophic exceptions should be checked separately.
- **Employer deposits must be comparable.** Outside a Section 125 plan, employer HSA contributions must be the same amount or percentage for comparable employees.

## How to decide for your team

1. **Look at who you employ** Ask for anonymous benefit priorities and affordability concerns. Have employees review personal medical scenarios privately with the administrator. Do not ask managers to collect diagnoses or pregnancy plans.
2. **Price both on the same census** Get an HDHP and a copay plan quote on the same network. Note the monthly difference per employee and per family.
3. **Decide what you'll give back** Choose an HSA deposit or HRA amount. Model several deposit amounts against covered claims and available cash. Even funding the full deductible does not change the plan’s coinsurance, network or maximum.
4. **Run the four scenarios** Use the healthy year, ER visit, MRI and baby above with your quoted numbers. Share the table with employees during open enrollment so they can choose with real figures.
5. **Consider offering both** If your carrier allows it, offer both plans and let employees choose. Set your contribution so the HDHP's lower premium is visible in their paycheck.

## Getting both

At Prescience, we design and run your company's health plan, from setup and enrollment to claims, compliance and COBRA. What your team gets:

- **An effective $0 deductible,** so the plan helps from the first visit.
- **Simple copays** shown before a visit, capped by a low out-of-pocket maximum.
- **A broad national PPO network,** plus providers we contract with directly.
- **24/7 physician-led care navigation:** a care team that finds the right provider, books appointments and explains costs up front.

What your company gets: one monthly cost set in your quote, usually 10–20% below comparable fully insured coverage and fixed before the plan starts, with no admin fees. You keep your payroll provider, and the plan can start mid-year.

> **Prescience Diamond: A company health plan with an effective $0 deductible.** You don't have to choose between a low premium and predictable visits: Diamond pairs an effective $0 deductible with simple copays, at a cost usually below comparable fully insured plans.
> - **An effective $0 deductible** and simple copays shown before a visit
> - **A broad national PPO network,** plus providers we contract with directly
> - **24/7 physician-led care navigation** that books visits and explains costs
> - **Usually 10–20% below comparable fully insured coverage,** fixed in your quote, with no admin fees
> Best for teams of about 15 or more that want one great group plan. [Get a Diamond quote](https://www.getprescience.com/get-started?p=Employer&product=diamond)

## Frequently asked questions

**Is an HDHP better than a PPO copay plan?**

Compare the actual premium, network, account contribution and cost sharing. HDHP describes a benefit design; PPO describes a network arrangement. Neither label establishes which plan has lower total cost.

**What is the minimum deductible for an HDHP in 2026?**

$1,700 for self-only coverage and $3,400 for family coverage.

**Can an HDHP have copays?**

Yes, generally after the applicable deductible. Certain preventive benefits and permitted telehealth can receive earlier coverage. An HSA deposit helps pay bills but does not change how the insurer applies its deductible.

**How much can I put in an HSA in 2026?**

$4,400 for self-only coverage and $8,750 for family coverage, including employer deposits, plus $1,000 more if you are 55 or older.

**How much do employers put into HSAs?**

KFF found an average of $690 for single coverage and $1,296 for family coverage in 2025, counting workers whose employer put in nothing. Among employers that contribute, it was $806 and $1,523.

**Is an HDHP cheaper for the employer?**

It can be, but use comparable quotes. Subtract employer HSA deposits and fees from premium savings. Different survey averages are not a guaranteed discount for the same group.

**What happens to HSA money when an employee leaves?**

It stays with them. HSA money belongs to the employee, including the employer's deposits, once it is in the account.

**Can someone on Medicare use an HDHP?**

They can stay on the plan, but they can't contribute to an HSA after enrolling in Medicare. They can still spend money already in the account.

## Sources

- [IRS Revenue Procedure 2025-19 (2026 HSA and HDHP limits)](https://www.irs.gov/pub/irs-drop/rp-25-19.pdf)
- [KFF, 2025 Employer Health Benefits Survey](https://www.kff.org/health-costs/2025-employer-health-benefits-survey/)
- [IRS, Guidance on new HSA tax benefits under the One, Big, Beautiful Bill](https://www.irs.gov/newsroom/treasury-irs-provide-guidance-on-new-tax-benefits-for-health-savings-account-participants-under-the-one-big-beautiful-bill)
- [IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans](https://www.irs.gov/publications/p969)
- [IRS, Notice 2026-5](https://www.irs.gov/pub/irs-drop/n-26-05.pdf)
- [IRS, Publication 15-B](https://www.irs.gov/publications/p15b)
- [HealthCare.gov, Out-of-pocket maximum](https://www.healthcare.gov/glossary/out-of-pocket-maximum-limit/)