High deductible health plan — What’s an HDHP?

High-deductible health plans (HDHPs) offer low premiums, but you will pay more out of pocket until you reach the plan’s deductible. It can be a good option if you’re looking for health insurance with low premiums. 

However, it’s important to understand how HDHPs work so you can choose the right plan for your healthcare needs.

What is a high-deductible health plan, and how does it work?

A high-deductible health plan (HDHP) is a type of health insurance plan that comes with a higher deductible than other plans. The deductible is the amount you pay out of pocket for healthcare services before your insurance starts covering costs. 

The health insurance company usually sets a maximum limit on how much you will have to pay in deductibles per year. For example, if your health insurance plan has a $2,000 deductible, you will have to pay the first $2,000 of medical expenses yourself. After you have paid the deductible, the health insurance company will begin to pay its share of the costs. The size of your deductible impacts your premium, so it’s important to choose a deductible that you can afford.

While these plans often have lower monthly premiums, they require you to pay more upfront when you need medical care.

What are the HDHP minimum deductible and out-of-pocket maximum limits?

The minimum annual deductible for individual coverage is $1,650, and the maximum annual out-of-pocket expenses (excluding premiums) are $8,300. 

For family coverage, the minimum annual deductible is $3,300, and the maximum annual out-of-pocket expenses (excluding premiums) are $16,600. The Internal Revenue Service sets these limits, which are adjusted annually based on inflation. 

HDHPs are often paired with health savings accounts (HSAs), which offer tax benefits for medical expenses. In 2025, the contribution limits for HSAs are $4,300 for individual coverage and $8,550 for family coverage.

Pros and cons of high-deductible health insurance plans

Here are the pros and cons of HDHPs: 

Pros:

• Lower premiums
• Same benefits and coverage as other plans like PPOs and HMOs
• Health savings accounts (HSAs) let you save for your health care tax-free
• Employers may contribute to a savings account to help you pay for care

Cons:

• Higher out-of-pocket costs
• You pay for all of your health costs until you meet your deductible; thereafter, you will pay a portion of the bill
• Out-of-pocket costs can be significant for people with chronic illnesses

Who should consider a high-deductible health insurance plan?

The type of health plan you get depends on your health status, finances, providers and what you want from your plan. If you’re in good health and don’t anticipate frequent doctor visits or prescriptions, an HDHP can save you money on premiums.

An HDHP requires a higher deductible before insurance kicks in. If you have enough savings to cover the deductible in the event of illness or injury, an HDHP could save you money overall.

A high-deductible health insurance plan works best for healthy individuals or families who can afford to pay higher deductibles in case of an emergency and are looking for ways to save on monthly premiums.

What is an HSA and how does it work with an HDHP?

A health savings account (HSA) is a type of savings account that allows you to set aside money on a pre-tax basis to pay for qualifying medical expenses. 

To be eligible for an HSA, you must have an HDHP. This means that your insurance plan must meet specific criteria set by the IRS, such as having a deductible of at least $1,650 for an individual or $3,300 for a family. You can use the funds in your HSA at any time for a qualified medical expense.

What happens to my HSA if I no longer have an HDHP? 

You can take your HSA with you when you leave an employer, but you can’t contribute to an HSA again unless you have an HDHP. However, you can tap into an HSA to help pay for care regardless of your current health plan.

Situations where an HDHP may not be the best choice

While high-deductible health plans can offer lower monthly premiums, they may not be the best option for everyone. Here are some situations where an HDHP might not be ideal.

• Frequent medical needs or chronic conditions: If you or a family member have ongoing health issues that require frequent doctor visits, prescriptions, or treatments, an HDHP may not be the best fit.

• Limited savings for deductible: HDHPs typically require a higher deductible, meaning you must pay more out of pocket before your insurance coverage kicks in. If you don’t have enough savings to cover the deductible, an HDHP can lead to significant financial strain.

• Families with young children: Parents may face higher healthcare costs due to frequent doctor visits, vaccinations, or unexpected illnesses. An HDHP’s high deductible could make managing these expenses harder than a plan with lower upfront costs.

• Short-term coverage needs: An HDHP might not be the best option if you only need health insurance for a short period.

Tips for managing a high-deductible health insurance plan

You can manage your healthcare expenses and make the most out of your high-deductible plan by following these tips.

• Understand your plan: Review your HDHP thoroughly. It includes knowing your deductible amount, out-of-pocket maximum, and how much you must pay before your insurance begins to cover costs.

• Shop around: HDHPs may require you to pay for most medical services out of pocket until you meet your deductible. That’s why you should shop around for the best prices on healthcare services. Use tools or websites that allow you to compare the costs of medical procedures, prescriptions and doctor visits in your area.

• Don’t delay care: Many HDHPs cover preventive services like vaccines, screenings and check-ups at no additional cost, even before you meet your deductible. Take advantage of these benefits to catch any potential health issues early, which can save you money on more expensive treatments later on.

• Contribute to a health savings account (HSA):  An HSA is a great way to save for expenses. Try to contribute the maximum amount to have tax-free money set aside for your healthcare needs.

• Use in-network providers: Stick to healthcare providers and facilities that are in-network to avoid paying higher out-of-pocket costs. In-network providers have agreements with your insurer to offer lower rates, saving you money on medical services.

Is an HDHP right for you?

An HDHP (high-deductible health plan) can be a good choice if you’re healthy, don’t need frequent medical care and want to save on premiums. With an HDHP, you’ll pay lower monthly premiums but higher out-of-pocket costs when you need care.  Before choosing a high-deductible plan, take some time to think about all the possible medical expenses you could face.

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