High-deductible health plans (HDHPs) are becoming more common as employers and insurers look for ways to lower premiums and encourage consumer-driven healthcare choices. While the idea of a high deductible may sound intimidating, HDHPs come with unique advantages—particularly when paired with a Health Savings Account (HSA).
If you’re shopping for health insurance or evaluating employer coverage options, it’s important to understand how HDHPs work, what they cover, and who is most likely to benefit. In this article, we’ll explain the pros and cons of HDHPs, how they differ from traditional plans, and help you decide if one is right for you.
What Is a High-Deductible Health Plan (HDHP)?
An HDHP is a type of health insurance plan that has lower monthly premiums and higher deductibles than traditional plans.
As of 2025, the IRS defines an HDHP as any plan with:
A deductible of at least $1,650 for an individual or $3,300 for a family
An annual out-of-pocket maximum of no more than $8,300 for an individual or $16,600 for a family
To qualify as a true HDHP, a plan must meet both criteria. These thresholds are adjusted each year for inflation. Importantly, these plans must also be HSA-eligible, meaning they follow specific IRS rules on coverage structure.
How Do HDHPs Work?
With an HDHP, you’ll pay the full cost of most medical services out of pocket until you meet your deductible. This includes:
Doctor visits
Lab work
Emergency room care
Prescriptions
Once you hit your deductible, the plan kicks in and begins to share costs through coinsurance. After you reach your out-of-pocket maximum, the plan covers 100% of additional covered expenses for the rest of the year.
Here’s an example:
Your deductible: $2,000
Coinsurance: 20% (you pay 20%, insurance pays 80%)
Out-of-pocket max: $6,000
You pay all medical bills up to $2,000. Then you pay 20% of costs until you hit $6,000 total. After that, everything is fully covered.
What Services Are Covered Before the Deductible?
One misconception is that HDHPs don’t cover anything until the deductible is met. In fact, all HDHPs must cover preventive services at no cost, even before you meet the deductible.
This includes:
Annual physicals
Vaccinations (flu, shingles, COVID-19, etc.)
Screenings for cancer, diabetes, cholesterol
Well-woman visits
Certain mental health screenings
These services are required by the Affordable Care Act (ACA) for all ACA-compliant plans, including HDHPs.
HDHPs and Health Savings Accounts (HSAs)
One of the biggest benefits of enrolling in an HDHP is eligibility for a Health Savings Account (HSA). This tax-advantaged account lets you save for medical expenses with triple tax benefits:
Contributions are tax-deductible (or pre-tax through payroll)
Growth is tax-free
Withdrawals are tax-free if used for qualified medical expenses
In 2025, you can contribute up to:
$4,300 for individual coverage
$8,550 for family coverage
$1,000 extra if you’re age 55 or older (catch-up contribution)
HSAs can be used for a wide range of expenses, including:
Deductibles and copays
Prescription drugs
Dental and vision care
Menstrual products and OTC medications
Unused HSA funds roll over year to year and never expire, making them a powerful tool for long-term healthcare savings—even in retirement.
More details: IRS Publication 969 on HSAs
Who Should Consider an HDHP?
An HDHP might be a good fit if you:
Are young and healthy, with few medical needs
Want a lower monthly premium
Can afford to pay the deductible if needed
Want to build savings in an HSA
Prefer to control how and when you spend your healthcare dollars
Many HDHP enrollees never meet their deductible in a given year, meaning they pay mostly for preventive services and occasional doctor visits out of pocket—but save money overall due to low premiums and HSA contributions.
Who Should Avoid an HDHP?
An HDHP might not be ideal if you:
Have chronic health conditions requiring frequent care or prescriptions
Expect high medical expenses (e.g., surgery, pregnancy, specialist visits)
Struggle to cover large expenses before insurance kicks in
Prefer predictable copays over variable coinsurance
While HDHPs cap annual expenses with an out-of-pocket maximum, reaching that cap can be financially challenging if you haven’t built up your HSA or other savings.
For those with complex or costly medical needs, a Gold or Platinum ACA plan, or a traditional PPO through an employer, may offer better protection.
HDHPs in Employer Plans vs. the ACA Marketplace
HDHPs are commonly offered in two settings:
1. Through Employers
Often one of multiple plan options
Employers may contribute to your HSA (a valuable perk)
Payroll deductions make saving automatic
Can be paired with wellness incentives
2. On the ACA Marketplace
Available as Bronze or Silver-tier plans
Eligible for premium subsidies if you qualify based on income
Can still contribute to an HSA, as long as the plan meets HDHP criteria
Watch for high out-of-pocket maximums and narrow networks
If your employer offers an HDHP with HSA contributions, it’s often the most cost-effective option—even if the deductible seems steep.
Tips for Making an HDHP Work for You
Budget for your deductible in case of emergency
Open and contribute regularly to your HSA
Use price transparency tools to shop for lower-cost services
Take advantage of telehealth and retail clinics
Track medical expenses so you can use HSA funds wisely
Don’t skip preventive care—it’s free!
Bottom Line
High-deductible health plans aren’t right for everyone, but they can offer powerful savings and flexibility for the right person—especially when paired with an HSA. If you’re healthy, financially stable, and interested in long-term savings, an HDHP might be a smart choice. But if you anticipate frequent care or prefer a plan with lower out-of-pocket risk, a more traditional plan could be the better option.
Compare your options carefully during open enrollment, and don’t forget to factor in total cost, not just the monthly premium.
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