High Deductible Health Plans: Your Complete Guide To HDHPs

Erik J. Martin is a Chicago area-based insurance writer whose articles have been featured in AARP The Magazine, The Chicago Tribune, Reader's Digest, USAA Magazine and other publications.

Erik Martin Insurance Writer

Erik J. Martin is a Chicago area-based insurance writer whose articles have been featured in AARP The Magazine, The Chicago Tribune, Reader's Digest, USAA Magazine and other publications.

Written By Erik Martin Insurance Writer

Erik J. Martin is a Chicago area-based insurance writer whose articles have been featured in AARP The Magazine, The Chicago Tribune, Reader's Digest, USAA Magazine and other publications.

Erik Martin Insurance Writer

Erik J. Martin is a Chicago area-based insurance writer whose articles have been featured in AARP The Magazine, The Chicago Tribune, Reader's Digest, USAA Magazine and other publications.

Insurance Writer Les Masterson Deputy Editor, Insurance

Les Masterson is a deputy editor and insurance analyst at Forbes Advisor. He has been a journalist, reporter, editor and content creator for more than 25 years. He has covered insurance for a decade, including auto, home, life and health. Before cove.

Les Masterson Deputy Editor, Insurance

Les Masterson is a deputy editor and insurance analyst at Forbes Advisor. He has been a journalist, reporter, editor and content creator for more than 25 years. He has covered insurance for a decade, including auto, home, life and health. Before cove.

Les Masterson Deputy Editor, Insurance

Les Masterson is a deputy editor and insurance analyst at Forbes Advisor. He has been a journalist, reporter, editor and content creator for more than 25 years. He has covered insurance for a decade, including auto, home, life and health. Before cove.

Les Masterson Deputy Editor, Insurance

Les Masterson is a deputy editor and insurance analyst at Forbes Advisor. He has been a journalist, reporter, editor and content creator for more than 25 years. He has covered insurance for a decade, including auto, home, life and health. Before cove.

| Deputy Editor, Insurance

Updated: Sep 7, 2022, 7:00am

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High Deductible Health Plans: Your Complete Guide To HDHPs

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Are you struggling to afford the high cost of health insurance and want to lower your premiums? Consider a high-deductible health plan (HDHP), which typically offers lower premiums.

HDHPs may save you money if you don’t need many health care services, but a plan’s out-of-pocket costs can add up if you make frequent trips to the doctor.

What Is a High-Deductible Health Plan?

A high-deductible health plan, also called a consumer-driven health plan, is health insurance with lower premiums but higher out-of-pocket costs when you need care. An HDHP can be any type of health insurance plan, including a preferred provider organization (PPO) or health maintenance organization (HMO) plan. What sets it apart is its deductible.

The IRS defines an HDHP as any plan with a deductible minimum of:

An HDHP’s total annual in-network out-of-pocket expenses (including deductibles, coinsurance and copayments, depending on the plan) can’t exceed $7,050 for an individual or $14,100 for a family. This ceiling doesn’t apply to out-of-network services.

This deductible must be met before the health plan pays for health care services beyond preventive care services like annual physicals.

How Does a High-Deductible Health Plan Work?

HDHPs are designed to safeguard against catastrophic out-of-pocket costs for covered treatment and services.

Here’s how an HDHP works:

Let’s look at an example of how a high-deductible health plan works.

If you have an HDHP, you may be able to see both in-network and out-of-network providers. But you save the most money when you stay in-network.

What Is a Health Savings Account?

You can often pair an HDHP with a health savings account (HSA). An HSA is a savings account that allows you to put pre-tax dollars aside to pay for qualified medical expenses.

You can use HSA funds to pay deductibles, copayments, coinsurance and other health care costs. Premiums typically cannot be paid for with HSA funds.

You can contribute up to $3,650 into your HSA for individual coverage and up to $7,300 for family coverage annually. Your employer can also contribute to the HSA. Unspent HSA funds roll over to the next year. Your HSA account may earn interest or other earnings, too.

Combining an HDHP with an HSA provides three tax benefits: You can contribute funds into your HSA for a tax deduction, earn tax-free interest on the account and avoid being taxed for withdrawing HSA funds for qualified medical expenses.

Another benefit of an HSA is that it’s yours, so you can take it with you when you change jobs.

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Pros and Cons Of a High-Deductible Health Plan

HDHPs have pluses and minuses. Take the time to weigh these pros and cons carefully before choosing a high-deductible health plan.

HDHP pros

HDHP cons

What Is a High-Deductible Health Plan in the ACA Marketplace?

The Affordable Care Act (ACA) marketplace (also known as Obamacare) offers plans across four metal tiers: Bronze, Silver, Gold and Platinum. These plans differ in how much you pay for premiums and out-of-pocket costs when you need care.

Silver and Bronze plans usually have lower premiums and higher deductibles and out-of-pocket costs, making them eligible as HDHPs. Gold and Platinum plans generally have low deductibles and higher premiums and don’t qualify as an HDHP.

You can save on the ACA marketplace if you qualify for premium tax credits and subsidies.

“About 85% of people on the ACA marketplace public exchanges receive subsidies from the government. If you make more than four times the federal poverty level, you don’t qualify for subsidies, but you can choose an HDHP. The most common HDHP type plan is the Silver plan, as Gold and Platinum plans are not as affordable,” says Edward Kaplan, senior vice president and national health practice leader for Segal, an employee benefits consulting firm in New York City.

“If someone qualifies for low-income premium subsidies, they more likely have enrolled in plans that are not HDHPs, as they actually qualify for more generous plans that are not HDHPs,” Kaplan says.

How Much Do High-Deductible Health Plans Cost?

People with a Bronze plan from the ACA marketplace pay an average of $928 a month for an unsubsidized plan, while a Silver plan costs $1,217 on average monthly. ACA marketplace health insurance premium costs vary based on multiple factors, including age, plan type, where you live, health insurance company and smoking use.

Here are the average unsubsidized costs for Bronze and Silver plans on the ACA marketplace, which often qualify as HDHPs.