What Defines a High Deductible Health Plan?
Demystify high deductible health plans. Learn their key financial rules, what's covered upfront, and how they connect to tax-advantaged savings accounts.
High Deductible Health Plans (HDHPs) are a distinct category of health insurance. They offer lower monthly premiums in exchange for higher deductibles compared to traditional options. HDHPs appeal to individuals and families who manage routine healthcare spending while benefiting from coverage for unexpected, significant medical events. Their popularity reflects a shift towards consumer-driven healthcare, where individuals take a more active role in medical decisions and expenditures.
Core Financial Components
Understanding an HDHP’s financial structure is key. A “deductible” is the amount an individual pays for covered medical services before their insurance plan contributes. Once paid, insurance typically covers a percentage of subsequent medical expenses.
The “out-of-pocket maximum” is the highest amount an individual or family will pay for covered medical expenses in a policy year. This limit includes deductibles, copayments, and coinsurance, but not monthly premiums. Reaching this maximum means the plan covers 100% of eligible medical costs for the rest of the year.
For 2025, the Internal Revenue Service (IRS) defines specific financial thresholds for HDHPs. The minimum annual deductible is $1,650 for self-only coverage and $3,300 for family coverage.
Maximum out-of-pocket expenses for HDHPs also vary by coverage type. For 2025, the maximum is $8,300 for self-only coverage and $16,600 for family coverage. These limits apply to in-network services.
Services Exempt from the Deductible
Not all medical expenses are subject to an HDHP’s deductible. Preventive care services are covered even before the deductible is met. This allows individuals to access essential health maintenance without upfront out-of-pocket costs.
Preventive care includes annual physical examinations, routine immunizations, and various health screenings. Common screenings covered at 100% include mammograms, colonoscopies, and cholesterol checks, depending on age and risk factors.
Some HDHPs may also cover chronic disease management services or specific items before the deductible applies. For instance, plans might cover medications or services for conditions like diabetes or asthma without requiring the deductible to be met first.
Eligibility for Health Savings Accounts
A defining feature of HDHPs is their strong connection to Health Savings Accounts (HSAs). Enrollment in an HSA-qualified HDHP is a prerequisite for opening and contributing to an HSA. This makes HDHPs attractive for saving for current and future healthcare expenses.
To qualify for an HSA, an individual must be covered under an HDHP that meets specific IRS criteria for minimum deductible and maximum out-of-pocket limits. These financial benchmarks are critical for a plan to be considered “HSA-eligible.”
Other HSA eligibility criteria exist beyond the HDHP requirement. An individual cannot be enrolled in Medicare or claimed as a dependent. They must not have other non-HDHP health coverage, with exceptions for specific injury, vision, dental, or long-term care insurance.
An HSA is a tax-advantaged savings account for healthcare expenses. Contributions are tax-deductible, funds grow tax-free, and qualified withdrawals are tax-free. For 2025, self-only HDHP coverage allows contributions up to $4,300, and family coverage up to $8,550. Individuals aged 55 and older can contribute an additional $1,000 annually.