What Is a High-Deductible Health Plan and Should You Get One?
High-deductible health plans are cheaper than other health insurance, but you'll pay for more of your medical bills yourself.
That's because a higher deductible means you have to pay more of your medical bills before your coverage starts. High-deductible health plans can be a good option if you don't go to the doctor often. But you should make sure you have enough money to cover the higher costs if you do need medical care.
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What is a high-deductible health plan?
A high-deductible health plan (HDHP) is a type of health insurance that requires you to pay more of your medical bills before your coverage starts.
Because you pay for more of your health care costs, these plans are usually cheaper than other types of health insurance.
The Internal Revenue Service (IRS) creates the requirements that HDHPs have to follow.
Individual plans
Family plans
Yearly amount | |
|---|---|
| Deductible | At least $1,650 |
| Out-of-pocket maximum | No more than $8,300 |
Requirements are for 2025 plans.
Individual plans
Yearly amount | |
|---|---|
| Deductible | At least $1,650 |
| Out-of-pocket maximum | No more than $8,300 |
Requirements are for 2025 plans.
Family plans
Yearly amount | |
|---|---|
| Deductible | At least $3,300 |
| Out-of-pocket maximum | No more than $16,600 |
Requirements are for 2025 plans.
That means, if you have a plan just for yourself, you have to pay at least the first $1,650 of your medical bills each year. After that, you and your health insurance company start to split the bill, which is called coinsurance. Between your deductible, coinsurance and any copays you have for doctor visits, you won't pay more than $8,300 total in a full year.
If you have a family HDHP, your out-of-pocket maximum depends on the type of deductible you have.
On some plans, each family member has an individual out-of-pocket maximum. Once a family member reaches their individual limit, the health insurance plan will pay for all the covered medical costs for that specific person only. But there is also a family out-of-pocket maximum that takes into account the medical costs for everyone in the family. Once the family limit is reached, the health insurance plan fully pays for everyone's health care. This is called an embedded out-of-pocket maximum. Families with this type of coverage might pay up to $16,600 in health care costs each year.
But some plans only have a family-level out-of-pocket maximum, also called a non-embedded out-of-pocket maximum. On this type of policy, there's no individual limit. Everyone's health care costs are pooled into the family limit. Families with non-embedded out-of-pocket-maximums will only pay up to $9,200 per year for their medical care before their plan starts to pay the full amount.
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High-deductible health plans and health savings accounts
You may be able to get a high-deductible health plan with a health savings account (HSA). An HSA is a savings account that lets you set aside money for medical costs, and you don't have to pay taxes on the funds. You can use your HSA to pay for doctor visits and medications, which go toward your deductible, copay and coinsurance costs.
You can often use your HSA for medical expenses like dental and vision checkups, contact lens solution, bandages and prescription medications. Each HSA has a list of eligible expenses. Be sure to know what your HSA covers and what it doesn't.
If you use your HSA to pay for an expense that's not on the eligible list, such as a cosmetic surgery, you will have to pay a 20% fine. So if the non-eligible charge was $1,000, you'll pay a fine of $200. You'll also have to pay income tax on the amount you spend because it loses its tax exemption. To avoid this, you can put the amount back into your HSA before you file your taxes for the year.
The IRS puts a limit on how much you can contribute to an HSA each year.
Plan type | Yearly contribution limit |
|---|---|
| Individual | $4,300 |
| Family | $8,550 |
If you're over 55, you can contribute an extra $1,000 each year to your HSA. If you're 65 or older, you can spend your HSA dollars on anything and you won't have to pay the 20% fine. But you'll still have to pay income tax on any purchases that aren't eligible medical costs.
HSAs are savings accounts, and you own the money in them. If you change to a new type of health insurance plan, you can still keep and use the money in your HSA for eligible costs. You just won't be able to put any more money in.
Pros and cons of HDHP insurance
Like all health insurance, high-deductible health plans have advantages and disadvantages. Understanding these benefits and drawbacks can help you decide if an HDHP is a good choice for you.
Pros
Cons
How much do high-deductible health plans cost?
High-deductible health plans are usually cheaper than other types of health insurance.
If you are generally healthy and don't go to the doctor often, an HDHP can save you money. You should make sure you can afford the higher deductible and out-of-pocket maximum, though. If you are seriously injured or sick, need surgery or have other extensive medical needs come up, you need to make sure you can afford your share of the bill.
But if you need medical care often, an HDHP probably isn't a good idea. In that situation, a health insurance plan with a lower deductible is usually a better idea. You will likely pay more each month, but because the plan covers more of your medical bills, you'll save money overall.
What does an HDHP cover?
Like other health insurance plans, high-deductible health insurance is required to cover at least 10 medical situations, called the "essential health benefits."
- Medical care outside the hospital
- Preventive and wellness care
- Emergency medical care
- Medical care in the hospital
- Pregnancy, maternity and newborn care
- Mental health and substance use care
- Prescription medications
- Rehabilitation care
- Laboratory services
- Pediatric services
Your high-deductible plan will have coverage for at least these services, and many plans have coverage for things that aren't on the list. But while these services are covered, you typically have to reach your deductible before your plan will start paying.
Some high-deductible health plans completely cover some types of medical care, like vaccinations and annual checkups, even if you haven't met your deductible. But coverage varies depending on the plan, so make sure to check with your health insurance company to know what services are fully covered before you reach your deductible.
Where can I buy a high-deductible health plan?
You can buy an HDHP on HealthCare.gov, your state's health insurance marketplace or directly through a health insurance company. If you get health insurance through your job, your employer might offer a high-deductible health plan.
However, not everyone will have access to an HDHP. Available plans vary based on where you live. If there isn't a health insurance company in your area with an HDHP option, you will have to choose another health insurance plan.
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Frequently asked questions
What is considered a high-deductible health plan?
To be considered a high-deductible health plan, a plan has to have at least a $1,650 deductible for individuals and $3,300 for families. And you won't spend more than $8,300 each year on health care costs if you're an individual, and no more than $16,600 per year as a family.
How do I know if I have a HDHP?
Many high-deductible health plans have "HDHP" or "HSA" in the plan name. If you're not sure if your plan qualifies, the best way to find out is to call your insurance company. If you have health insurance through your employer, you can also check with your Human Resources or Benefits department.
What is the difference between a PPO and an HDHP?
A PPO is a type of health insurance network, which sets out the rules for what doctors you can see and still have coverage. An HDHP is a health insurance plan with a high deductible. HDHPs can use PPO networks, or they might use an HMO, POS or EPO network.
Sources
Sources for this article include HealthCare.gov, the Internal Revenue Service (IRS).
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