A high-deductible health plan (HDHP) is a type of health insurance plan with higher deductibles and lower monthly premiums compared to traditional health plans.
Understanding high-deductible health plans
Key features of HDHPs for 2025
High deductibles:
To qualify as an HDHP in 2025:
- Self-only coverage: The deductible must be at least $1,650.
- Family coverage: The deductible must be at least $3,300.
Annual out-of-pocket maximums:
These plans cap the total out-of-pocket expenses (including deductibles, co-payments, and other amounts, but excluding premiums):
- Self-only coverage: Maximum out-of-pocket is $8,300.
- Family coverage: Maximum out-of-pocket is $16,600.
Health Savings Accounts (HSAs) for 2025
HSAs are tax-advantaged accounts designed to complement HDHPs by helping individuals save for healthcare expenses.
Annual contribution limits:
For 2025, individuals can contribute up to:
- Self-Only Coverage: $4,300.
- Family Coverage: $8,550.
These contributions are tax-deductible, grow tax-free, and can be used tax-free for eligible medical expenses.
Excepted benefit Health Reimbursement Arrangements (HRAs)
In 2025, employers offering excepted benefit HRAs (which cover limited medical expenses) can newly provide up to $2,150 per plan year.
See also: What are health plan promotions?
Who might benefit from an HDHP?
- Healthy individuals with few anticipated medical expenses who want to save on monthly premiums.
- People who can contribute to and benefit from an HSA.
- Those who are comfortable with potentially higher out-of-pocket expenses for unexpected medical needs.
See also: HIPAA Compliant Email: The Definitive Guide
Benefits of HDHPs with HSAs
- Lower premiums: Makes monthly health insurance more affordable.
- Tax advantages:
- HSA contributions are tax-deductible.
- Funds grow tax-free.
- Withdrawals for qualified expenses are tax-free.
- Flexibility: Funds roll over each year and can be used for future medical expenses, including retirement healthcare needs.
FAQs
What is health insurance?
Health insurance is a contract between you and an insurer that provides financial coverage for medical expenses. It helps pay for healthcare services, such as doctor visits, hospital stays, prescriptions, and surgeries.
What is the difference between a premium, deductible, and copayment?
- Premium: The amount you pay monthly for health insurance coverage.
- Deductible: The amount you must pay out-of-pocket for healthcare services before your insurance starts covering costs.
- Copayment (Copay): A fixed amount you pay for a specific healthcare service, typically when you visit a doctor or pharmacy.
How does an HDHP differ from a traditional health plan?
An HDHP has a higher deductible and lower premium than traditional health plans. In a traditional plan, you typically pay lower out-of-pocket costs, but the premiums are higher. HDHPs place more responsibility on the insured individual to cover medical expenses before insurance kicks in.
Tshedimoso Makhene
