What Is a High-Deductible Health Plan?

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A high-deductible health plan (HDHP) has lower monthly premiums and a higher deductible than other health insurance plans. The IRS determines deductible and annual expense thresholds for HDHPs.

Key Takeaways

  • A high-deductible health plan has lower monthly fees and a higher deductible than other plans.
  • The IRS determines the thresholds for annual deductibles and annual expenses.
  • These plans can save you money on monthly payments, but you may have to pay more out of pocket for some health care expenses.
  • Often HDHPs are paired with health savings accounts (HSAs), which can cover the deductible.

How a High-Deductible Health Plan Works

An HDHP is a health plan that has lower monthly fees than other types of plans. However, as the name suggests, you'll need to pay more before your insurance begins to pay. You'll be paying for the treatments you need until you meet your maximum out-of-pocket (OOP) costs.

The deductibles for an HDHP are often higher than the minimums set by the IRS, and they may be as high as the maximum OOP costs. Maximum OOP costs include deductibles, co-payments, and coinsurance.

Deductibles exclude monthly fees and costs not covered by your HDHP, including out-of-network expenses.

All plans bought through an Affordable Care Act (ACA) Marketplace and most through other means have to cover certain preventive services at an in-network provider no matter how much of your deductible you've paid. HealthCare.gov provides lists of preventive services for all adults and those only for women and children.

HSAs and HRAs Can Help Cover Out of Pocket Costs

If you have an employer HDHP, it may be paired with a health savings account (HSA) or health reimbursement arrangement (HRA). In this case, you set aside income before taxes in an HSA to put money toward your deductible or to pay for health care as needed. However, HSA funds cannot be used to pay monthly fees. If your employer wants to, they are also able to pay into your HSA.


You're only able to pay into an HSA if you have an HDHP, per the rules set by the IRS.

Only an employer can fund an HRA. An HRA is an account your employer puts money in before it is taxed. To participate in an HRA, you may have to enroll in a health insurance plan. You may also be able to use the funds from the HRA for family members, but they might need to be enrolled in a health plan also. In some cases, HRA funds may be used to pay monthly fees.

Also, the IRS has given some guidance on the types of preventive services HDHPs may offer without needing to meet deductible limits. You may not need to meet a deductible that is less than the yearly minimum. The initial list of these services was released in 2004, and the IRS added extra services in 2019.


Money in an HSA or HRA can be rolled over and used in the next year.

Pros and Cons of an HDHP

If you are healthy and don't visit the doctor often, an HDHP may be the cheapest type of health insurance plan you can get. If you have a small family, an HDHP may also work well. If you or your family members don't have any existing medical conditions, or you may not have to pay too many medical bills, an HDHP might work well for you.

An HDHP may also be right for you if you have enough savings to cover any costs. It's not always possible, but if you choose an HDHP (this may be your only choice), you should work to have enough cash on hand to cover your deductible and other OOP costs.

The number one downside to an HDHP is that you have to meet your deductible when you're treated until you meet your OOP cost limit. At the same time, you'll be paying monthly fees. They might be lower than those for traditional plans, but they may not be affordable if you haven't maxed out your OOP costs for the year.

Larger families can cause your out-of-pocket costs to increase. If you have children, your medical costs might be too high also because they tend to need more doctor visits than young and older adults.


In an ACA Marketplace, bronze plans tend to have the highest deductibles and lowest monthly fees.

This means that you pay monthly for your plan, but you could also have $14,100 in costs to pay before your insurance kicks in. For example, say you have three very active kids. You pay $500 per month for insurance and have a minimum annual family deductible of $2,800.

Your family has five emergency room visits in one year (three for the kids and one each for you and your spouse), each one costing $1,300. You've paid $6,500 for the visits and $6,000 for your plan this year. Your total health care costs for the year are $12,500. You have a max OOP of $14,100, so you could pay up to $7,600 more before your insurance helps out if there are any other doctor visits.

Some people with an HDHP do not get medical help because they don't have the money to pay for it, and they haven't met their deductible. In a survey published in 2019 by the Kaiser Family Foundation, half of the adults said either they or a family member had gone without care from a doctor (or dentist) because it cost too much.

If you have a chronic condition and need to visit doctors often, an HDHP may not be the best option for you.

Frequently Asked Questions (FAQs)

How do HDHP premiums compare to other plans?

Generally premiums for high-deductible health plans are lower than premiums for other types of plans. This is because the higher deductible means the insured is covering more of the costs than the insurer is.

What is a high-deductible health plan?

A high-deductible health plan (HDHP) is a health insurance product that features lower monthly premiums and a higher deductible than other health insurance plans. The IRS determines deductible and annual out of pocket expense thresholds for HDHPs. They are often paired with health savings accounts that can cover some of the insured's out of pocket costs.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. HealthCare.gov. "High Deductible Health Plan (HDHP)."

  2. HealthCare.gov. "What Are HDHPs & HSAs?"

  3. Internal Revenue Service. "Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans," Page 3.

  4. Internal Revenue Service. "Publication 969: Health Savings Accounts and Other Tax-Favored Health Plans," Pages 2-5, 17-18. 

  5. Kaiser Family Foundation. "Americans’ Challenges With Health Care Costs."

  6. Kaiser Permanente. "Is a High-Deductible Health Plan Right for You?"

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