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What is a high deductible health plan?

A high deductible health plan is a form of insurance coverage that offers lower than usual monthly premiums while providing a deductible that's higher than the typical plan. As this type of plan results in the person covered paying more for health care costs before the insurance company begins to pay its portion, HDHPs are often paired with health savings accounts that allow for the use of tax-free money to pay for specific medical expenses.

To qualify as a high deductible health plan in 2020, the deductible had to be at least $1,400 for an individual and $2,800 for a family. Additionally, high deductible health plans have out-of-pocket limits that, once exceeded, require the insurance company to pay for all in-network services. In 2020, the limit was $6,900 for individuals and $13,800 for families.

 


Learn more about high deductible health plans

When do I need to be aware of a high deductible health plan?

Many people will enroll in high deductible health plans during their annual health insurance enrollment period. This type of health plan is often popular with people in good general health and without a history of injuries, those capable of paying the high deductible in an emergency, as well as individuals capable of making regular contributions to their health savings account.

What is important to know about a high deductible health plan?

Health savings accounts are an important component of eligible high deductible health plans due to their many benefits:

  • Funds can be deposited pre-tax directly from your paycheck or you can make the post-tax contribution yourself and deduct the taxes when you file your yearly taxes.
  • The funds from health savings accounts can be spent on eligible medical expenses and help you meet your deductible.
  • Unused contributions roll over year-to-year, so there's no penalty for not using your entire balance each year.
  • Health savings accounts earn interest and can be invested in stocks or mutual funds.