(This post was originally published in May, 2013 and was updated in Nov, 2016, Oct, 2017, Aug 2018, and Nov 2019)
A high-deductible health plan (HDHP) is just what the name implies. It is a health insurance plan that has a higher deductible than traditional insurance plans. An HDHP also has lower premiums than traditional coverage.
In plain English, when you’re covered by an HDHP, since you pay for your medical costs up to the amount of the deductible, you’re basically getting catastrophic coverage. In other words, you have coverage for unexpected or out-of-the ordinary medical event(s) that would cause your costs to exceed your deductible.
And if you contribute to a health savings account, you can use those pre-tax dollars to pay for your medical expenses.
A HDHP may be a good option for you if you are in a higher income tax bracket and do not expect a lot of medical expenses.
Keep in mind – when you are covered by a HDHP you pay for all of your medical care until you reach the deductible, except for in-network wellness care which is covered at 100%.
IRS Limits for HDHPs
The minimum and maximum deductible amounts and out-of-pocket expenses for high-deductible health plans are set by the IRS.
For 2018, 2019, and 2020, here are the amounts:
|HDHP minimum deductible||
|HDHP maximum out-of-pocket (deductibles, co-payments and other amounts, but not premiums)||
HDHPs can be bought by individuals, or they may be offered by an employer as an option under group coverage. Whether your get your coverage on your own or through your employer, however, a critical feature of having an HDHP is that you are eligible to set up and contribute to a Health Savings Account (HSA).
Click here to learn what an HSA is, how it works, and why it is beneficial.