What’s a high deductible health plan (HDHP)?

A high deductible health plan (HDHP) is a type of health insurance plan that offers lower premiums in exchange for higher out-of-pocket costs. With HDHPs, you’ll pay less each month, but more when you get care compared to other health plans.

Who should enroll in a high deductible health plan?

HDHPs may be a good fit for someone who’s in fairly good health and typically only sees their doctor once a year for preventive care. But there are lots of different factors to consider during the plan year. Things like:

  • How often you plan to see your doctor
  • How many tests or screenings you think you’ll need
  • Whether or not you plan to use a health savings account (HSA)
  • If your employer contributes to your HSA

What's the difference between an HDHP plan vs. a PPO, HMO, POS or EPO plan?

Think of the term HDHP as a way to describe any health insurance plan with a high deductible. As long as a plan includes a minimum deductible that meets the limit for that year, it's considered an HDHP. This means any plan can be a high deductible health plan — whether it's a preferred provider organization (PPO), health maintenance organization (HMO), point of service (POS) or exclusive provider organization (EPO) plan.

What’s an HSA-eligible health plan?

High deductible health plans are also called HSA-eligible plans. They’re the only type of health insurance you can pair with a health savings account. HDHPs and HSAs go together  for a good reason. HSAs can be used to help pay for certain out-of-pocket health care costs and get you closer to reaching your deductible. An HSA comes with its own set of perks, like tax-free saving, employer contributions and freedom to take your HSA with you if you switch jobs.

How does an HDHP work?

High deductible health plans help protect against really high-cost (and even unplanned) services. These can include things like hospital stays, surgeries and complex treatment care that may quickly get you to that deductible. Until you reach your network deductible, you’ll pay for all your health care costs.

Once you reach your network deductible, you’ll split the cost of covered care with your health plan through copays or coinsurance. Then, once you reach your plan’s network out-of-pocket maximum, the plan will pick up the tab for any future covered services. (With plans that offer both network and out-of-network benefits, you’ll have a network deductible as well as an out-of-network deductible and out-of-pocket maximum.)

For example, let’s say you have a high deductible health plan with a network deductible of $1,700. After a surgery and a hospital stay, maybe you reached that network deductible. If that happens, you’d start to split the cost of covered services with your health plan and pay 20% of the bill from now on. You could end up reaching your out-of-pocket maximum after a few more doctor visits and some high-cost tests. Then, your plan would pay for all covered services moving forward until the end of the plan year.

Does an HDHP cover preventive care?

High deductible health plans typically cover preventive care care, like an annual wellness exam. This includes things like vaccines, and tests and screenings for certain health conditions.

What are the advantages of an HDHP?

If you’re planning to rarely see your doctor throughout the plan year, an HDHP may be a good option. Advantages of a high deductible health plan include:

  • Lower premiums compared to other plans
  • Option to pair with an HSA

What are the disadvantages of an HDHP?

A high deductible health plan isn’t for everyone or every family. You may not benefit from an HDHP if you frequent your doctor’s office or anticipate unplanned urgent care visits (like for sick kids). That’s especially true if you don’t plan to use an HSA to pay for out-of-pocket costs. Disadvantages of a high deductible health plan can include:

  • Expensive out-of-pocket costs if you get more care than you had planned
  • Deductibles can be very high

High deductible health plans can be a great fit if they match your care needs. You may want to decide if you prefer a PPO, HMO, POS or EPO plan first. Then, decide if a high deductible health plan is right for you. Be sure to compare all your options before choosing a plan.