PPO vs. HDHP vs. HMO: which health plan should your B2B SaaS company offer?

Most B2B SaaS founders pick a health plan type without understanding what they're buying. The short answer: at Series A, offer an HDHP+HSA as your base plan and a PPO as a buy-up option. That's what 52% of SaaS companies in this range actually do. HMOs are a niche choice — only worth it if your team is concentrated in a Kaiser market. If you're approaching 50 FTEs, the ACA employer mandate is the compliance constraint that forces the decision. Here's what each plan type actually is, who it's right for, and what the numbers look like.

How a PPO works

A PPO (Preferred Provider Organization) lets employees see any doctor or specialist — no referrals required, no gatekeeper. In-network care is cheaper; out-of-network is covered at a higher employee cost, but it's covered. The 2025 average annual single premium is $9,818, with employers at small firms covering roughly 82% of that.

PPOs dominate tech because they thread the needle between cost control and employee autonomy. Workers won't accept being locked into a narrow network. PPOs solve this. The tradeoff: they're the most expensive plan type for you to fund, and that cost compounds every year — health premium inflation ran +6% in 2025, above wage growth for the first time since 2022.

PPOs are the right default for a multi-state remote SaaS team where employees are in 5+ states. An HMO with a California-centric network is useless to an engineer in Austin.

How an HDHP + HSA works

An HDHP (High-Deductible Health Plan) has a higher deductible than a PPO — IRS minimum is $1,650 single / $3,300 family for HSA-eligible plans in 2025. In exchange, the premium is lower: $8,620 annually for a single employee on average. The HDHP pairs with an HSA (Health Savings Account), which is the only triple-tax-advantaged vehicle in the US tax code — contributions go in pre-tax, grow tax-free, and withdrawals for qualified medical expenses are tax-free.

The typical Series A setup: HDHP as the default plan (employer covers 100% of premium), employer seeds the HSA with $500–$1,000/year, PPO available as a buy-up (employee pays the premium difference). Healthy employees self-select into the HDHP. Employees with families or ongoing health needs choose the PPO. Average employer cost is 8–12% lower than funding a PPO for everyone.

The Sequoia 2026 SMB Benefits Benchmark shows this two-plan design is now the standard for B2B SaaS companies at the Series A stage. It's not a cost-cutting move — it's the benchmark.

How an HMO works

An HMO (Health Maintenance Organization) is a closed network. Employees must use in-network providers and need a referral from their primary care physician to see a specialist. In exchange, premiums are the lowest of the three types — 2025 average of $9,229 annually for a single employee (marginally below a PPO for a different reason: network restriction, not benefit reduction).

HMOs went from 31% of enrollment in 1996 to 12% today. The reason: workers won't accept a gatekeeper model long-term. The exception is Kaiser in California, Oregon, Colorado, and Washington — Kaiser is a vertically integrated insurer and provider network, zero-deductible, and consistently the lowest-cost option in those markets.

For a B2B SaaS company with a distributed workforce, offering only an HMO is a recruiting liability. If you're in a Kaiser market, offer it alongside a PPO or HDHP — not as the only option.

PPO vs. HDHP vs. HMO: side by side

Which plan is right for your B2B SaaS company's stage?

Under 25 employees: You likely shouldn't be on a group plan yet — especially if your team is in multiple states. ICHRA (individual coverage HRA) lets each employee buy a plan in their own market and you reimburse a fixed monthly amount. Cheaper, simpler, and eliminates the network gap problem.

25–50 employees: This is when a group plan starts making economic sense, especially if your team is concentrated in 1–2 states. The right setup: HDHP+HSA as base, PPO as buy-up. Seed the HSA. Benchmark your contribution levels against Series A peers before open enrollment.

Approaching 50 FTEs: Model your ACA compliance now. Once you cross 50 full-time equivalent employees, you're an Applicable Large Employer (ALE). You must offer minimum-value, affordable coverage to ≥95% of full-time employees or face penalties of ~$2,900/year per employee. The affordability threshold for 2025: employee premium share can't exceed 9.02% of household income. HDHP and PPO both satisfy the mandate; HMOs do too. The plan type matters less than designing it correctly.

50+ employees: If you're in a Kaiser market, add the HMO as a third option. Otherwise, two plans — HDHP base + PPO buy-up — is the B2B SaaS standard. Review the KFF 2025 Employer Health Benefits Survey before your next renewal to understand where your premiums sit relative to the market.

What changes in your finance stack

The plan type decision ripples into your budget model, your headcount model, and your people ops calendar.

Budget: HDHP premiums are ~12% lower than PPO. At 50 employees with 100% employer-paid premiums, that's roughly $60k/year in employer savings — not nothing. But the variance at renewal is the bigger issue. Group health premiums routinely increase 10–20% annually. Budget for it explicitly; don't let it surface as a surprise in Q4.

Section 125 / FICA savings: Employee premium contributions run through a Section 125 cafeteria plan — employees pay their share pre-tax, which means you don't pay employer FICA (7.65%) on those dollars. At 50 employees with average $1,500/year employee contributions, that's ~$5,700/year in employer FICA savings. Stays with you as long as you're not on a PEO.

HSA employer seed: If you're offering HDHP+HSA, the employer HSA contribution is a payroll line item. Budget $500–$1,000/employee/year. It's tax-deductible to the company and tax-free to the employee — the most efficient form of compensation you can offer.

How a fractional finance team can help

The plan type decision is a finance decision as much as an HR decision. The premium delta between PPO and HDHP at 100 employees is material. The ACA penalty math at the 50-FTE line requires accurate FTE counting. The Section 125 FICA savings are real but require the right plan structure.

At Bridges, we work with B2B SaaS companies at the $3M–$30M ARR stage on exactly this kind of decision — building the cost model, pressure-testing the plan design against ACA compliance requirements, and helping you benchmark against what Series A and Series B SaaS companies are actually doing. If you're approaching a benefits renewal or the 50-FTE line, this is worth a conversation.