What Is Considered a High Deductible Health Plan?

A High Deductible Health Plan (HDHP) represents a distinct type of health insurance coverage. These plans feature a unique cost-sharing arrangement that influences how individuals pay for their healthcare services. Understanding what qualifies as an HDHP is important for consumers, as it impacts financial planning for medical expenses and access to certain tax-advantaged accounts.

Defining a High Deductible Health Plan

A High Deductible Health Plan is characterized by lower monthly premiums coupled with higher deductibles. The insured individual pays for most medical expenses out-of-pocket until the established deductible is met. After the deductible is met, the insurance plan typically begins to cover a portion of the costs, often through co-insurance, up to an out-of-pocket maximum.

Preventive services are generally an exception to the deductible requirement. This design is intended to encourage individuals to be more engaged and cost-conscious in their healthcare decisions. The higher deductible means individuals bear more direct financial responsibility for routine medical costs.

IRS Criteria for HDHP Qualification

The Internal Revenue Service (IRS) establishes specific criteria that a health plan must meet to be recognized as an HDHP. These thresholds for minimum deductibles and maximum out-of-pocket limits are adjusted annually to account for inflation.

For the 2025 calendar year, a health plan is considered an HDHP if its annual deductible is not less than $1,650 for self-only coverage. For family coverage, the minimum annual deductible is $3,300. These figures represent the baseline amount an individual or family must pay for covered services before their insurance benefits begin to apply, excluding certain preventive care.

An HDHP must also adhere to limits on out-of-pocket expenses. For 2025, the maximum amount of out-of-pocket expenses cannot exceed $8,300 for self-only coverage. For family coverage, this maximum is set at $16,600.

The out-of-pocket maximum includes payments for deductibles, co-payments, and co-insurance for in-network services. This maximum does not include health insurance premiums, costs for non-covered services, or expenses incurred from out-of-network providers. Both the minimum deductible and maximum out-of-pocket limits must be met for a plan to maintain its HDHP designation.

Relationship with Health Savings Accounts

Enrollment in a qualifying High Deductible Health Plan is a prerequisite for eligibility to open and contribute to a Health Savings Account (HSA). An HSA is a tax-advantaged savings account for qualified medical expenses. This account helps manage healthcare costs with tax benefits.

Only individuals covered by an HDHP, and not covered by other non-HDHP health insurance, are eligible to contribute to an HSA. The HDHP allows individuals to leverage the financial advantages of these specialized savings accounts. Funds contributed to an HSA can grow tax-free and withdrawals for qualified medical expenses are also tax-free, making it a valuable tool for healthcare financial planning.