Jane Dotson
A High-Deductible Health Plan (HDHP) is a type of health insurance plan that offers lower premiums in exchange for higher out-of-pocket costs. HDHPs are typically paired with a Health Savings Account (HSA), which allows you to set aside money on a pre-tax basis to pay for qualified medical expenses. While HDHPs can help reduce overall healthcare costs, they may not be suitable for individuals who frequently visit the doctor or require unplanned urgent care.
| Characteristics | Values |
|---|---|
| Definition | A type of health insurance plan with a high deductible. |
| Who is it for? | People who rarely need to see a doctor. |
| Pros | Lower premiums; access to primary and specialty care, local medical facilities, lab services, and prescription drugs; can be paired with a health savings account (HSA); typically covers in-network preventive care in full without having to meet the deductible. |
| Cons | High out-of-pocket expenses for non-preventative care; may cause people to put off doctor visits due to high initial out-of-pocket costs. |
| Deductible | Per IRS guidelines in 2026, an HDHP has a deductible of at least $1,700 for an individual plan and $3,400 for a family plan. |
| Out-of-pocket limit | No higher than $8,500 for an individual plan or $17,000 for a family plan. |
Explore related products
What You'll Learn
HDHPs and health savings accounts (HSAs)
A High Deductible Health Plan (HDHP) is a health plan product that combines a Health Savings Account (HSA) or a Health Reimbursement Arrangement (HRA) with traditional medical coverage. An HDHP/HSA or HRA provides insurance coverage and a tax-advantaged way to save for future medical expenses. It gives you greater flexibility and discretion over how you use your healthcare funds, as the money can be used to cover qualified medical expenses not covered by your health plan.
An HSA is a type of savings account that lets you set aside money on a pre-tax basis to pay for qualified medical expenses. You can contribute to an HSA only if you have an HSA-eligible plan (HDHP). You can deduct the amount you deposit in an HSA from your taxable income. Unspent HSA funds roll over from year to year, and you can hold and add to the tax-free savings to pay for medical care later. HSAs may earn interest that can't be taxed. Generally, HSA funds cannot be used to pay premiums. Once you turn 65, you can use the money in your HSA for anything you want. If you don't use it for qualified medical expenses, it counts as income when you file your taxes.
The money you contribute to an HSA is tax-deductible or pre-tax, and any increase in the value of your account (such as through capital gains and dividends on investments held in the HSA) is free from federal taxes, as long as withdrawals are made for qualified medical expenses. Some HSAs function solely as savings accounts, while others allow you to invest your contributions in a selection of mutual funds or other investment choices, giving your account the potential to grow in value.
HDHPs may have a higher annual deductible than traditional health plans. For example, in 2021, an HDHP in the FEHB Program had a minimum annual deductible of $1,400 for Self Only coverage and $2,800 for Self Plus One/Self and Family coverage. HDHPs in the FEHB Program have annual out-of-pocket limits that do not exceed $7,000 for Self Only coverage and $14,000 for Self Plus One/Self and Family coverage.
Explore Medical Insurance Options Beyond Your Workplace
You may want to see also
Explore related products
HDHPs and out-of-pocket costs
A high-deductible health plan (HDHP) is a type of health insurance plan that offers lower premiums in exchange for higher out-of-pocket costs. This means that you will pay less each month but more when you receive care compared to other health plans.
The deductible is the amount you pay out of pocket for medical expenses before your insurance pays anything. For example, according to IRS guidelines in 2026, an HDHP is a health insurance plan with a deductible of at least $1,700 for an individual plan or a deductible of at least $3,400 for a family plan.
The out-of-pocket limit is the most you'll have to pay in a year for medical expenses covered by your insurance plan. For 2025, a person with an HDHP could be required to pay no more than $8,300 in total out-of-pocket costs for in-network care, whereas a person with a non-HDHP could have an out-of-pocket limit as high as $9,200 for in-network care.
HDHPs are believed to lower overall healthcare costs by making people more aware of the cost of medical expenses. This type of plan is best suited for younger, healthier individuals who may not need to go to the doctor or hospital often. If you frequently visit the doctor or take prescription medication, you may want to avoid an HDHP as you may find yourself wanting to skip doctor visits because of the high out-of-pocket costs.
Doctors: Understand Your CA Insurance Minimums
You may want to see also
Explore related products
HDHPs and preventive care
A High-Deductible Health Plan (HDHP) is a health insurance plan with a high minimum deductible for medical expenses that must be paid out of pocket before insurance coverage kicks in. HDHPs are suited for people who are healthy, can afford to pay more out-of-pocket, or who only need preventive care.
HDHPs typically cover in-network preventive care in full without requiring the policyholder to meet their deductible. This includes screening tests, immunizations, behavioural counselling, and medications that can prevent the development or exacerbation of diseases and health conditions. The Affordable Care Act (ACA) requires non-grandfathered health plans to cover a range of recommended preventive services without participant cost-sharing. This means that these preventive services must be covered with no deductibles, copayments, or coinsurance.
However, a study by researchers at the Robert Graham Center for Policy Studies in Family Medicine and Primary Care found that Americans with HDHPs but no health savings accounts (HSAs) are less likely to see primary care physicians, receive preventive care, or seek subspecialty services. The authors of the study explained that many HDHP insurance plan enrollees are unaware that the ACA covers preventive care office visits, screening tests, immunizations, and counselling with no out-of-pocket charges. They recommended educating HDHP enrollees about these exemptions to improve access to preventive care services.
In October 2024, the Internal Revenue Service (IRS) issued Notices 2024-71 and 2024-75, which expanded the list of "preventive care" benefits permitted to be provided by HDHPs without a deductible. This included over-the-counter (OTC) oral contraceptives, male condoms, continuous glucose monitors, insulin, and breast cancer screening services. These expansions provide greater access to preventive care services for individuals with HDHPs.
Cleveland Clinic's Accepted Insurance Plans: What You Need to Know
You may want to see also
Explore related products
$104.99 $125.98
$65.99 $79.98
$59.99 $79.98
HDHPs and tax advantages
A High-Deductible Health Plan (HDHP) is a health plan product that combines a Health Savings Account (HSA) or a Health Reimbursement Arrangement (HRA) with traditional medical coverage. It provides insurance coverage and a tax-advantaged way to help save for future medical expenses.
The money that goes into your HSA comes from your paycheck before taxes are taken out, lowering your taxable income. For example, if you earned $70,000 and put $5,000 into your HSA, you would only owe income taxes on $65,000 for that year. You can also make after-tax contributions to your HSA and claim these as deductions when filing your federal income tax return. Distributions from your HSA are also not taxed as long as they are considered "qualified" distributions.
You can use your HSA to pay for a range of qualified medical expenses, including doctor visits, prescription drugs, dental care, vision care, and over-the-counter health products. In addition, your HSA can cover copays, coinsurance, and other health care costs not covered by your health plan.
HDHPs typically have lower premiums, which can save you money on your monthly health insurance costs. However, it is important to note that high deductibles mean higher out-of-pocket costs. You must carefully consider your expected health costs for the coming year to determine if an HDHP is the right choice for you.
Spousal Medical Insurance: Can You Cancel Post-Marriage?
You may want to see also
Explore related products
HDHPs and different types of health insurance plans
A High-Deductible Health Plan (HDHP) is a type of health insurance plan that offers lower premiums in exchange for higher out-of-pocket costs. With HDHPs, you pay less each month but more when you receive care compared to other health plans. This type of plan is best suited for younger and healthier people who rarely need to see a doctor and only require coverage in the case of a serious health emergency. Wealthy individuals and families who can afford to pay the high deductible may also benefit from HDHPs, as they offer access to a tax-advantaged Health Savings Account (HSA).
The main difference between HDHPs and traditional health insurance plans is the amount of the deductible, which is the portion of an insurance claim that the insured must pay out of pocket before the policy coverage is activated. HDHPs have higher deductibles, which means lower insurance premiums and more affordable monthly costs. For example, the Internal Revenue Service defines the minimum deductible for an HDHP as $1,600 for individuals and $3,000 for family coverage in 2024, compared to a typical insurance plan deductible of \$500 or less.
HDHPs typically cover preventive care, such as annual wellness exams, vaccines, and tests and screenings for certain health conditions. They may also cover in-network preventive care in full without requiring you to meet your deductible. This can include screenings for heart disease, infectious disease, mental health conditions, and obstetric and gynecological conditions.
It is important to note that HDHPs may not be the best option for everyone. If you frequently visit the doctor or anticipate unplanned urgent care visits, you may not benefit from an HDHP, especially if you do not plan to use an HSA to pay for out-of-pocket costs.
Overall, HDHPs can be a great option for those who rarely need medical care and are looking for a more affordable monthly insurance plan.
Executive Medical Insurance: Cobra Eligibility Explained
You may want to see also
Frequently asked questions
HDHP stands for High-Deductible Health Plan. It is a type of health insurance plan that offers lower premiums in exchange for higher out-of-pocket costs.
With an HDHP, you pay less each month but more when you receive care. This means that you pay lower monthly premiums but a higher deductible.
The deductible is the amount you pay out-of-pocket for medical expenses before your insurance pays anything. For 2026, an HDHP must have a deductible of at least $1,700 for an individual plan and $3,400 for a family plan.
An HDHP can save you money on health insurance, especially if you rarely visit the doctor. It also allows you to contribute to a Health Savings Account (HSA) to pay for qualified medical expenses with tax advantages.
