Omar Bennett
A high-deductible health plan (HDHP) is a type of health insurance coverage with a high deductible that meets specific Internal Revenue Service (IRS) guidelines. HDHPs are the only plans that allow an enrollee to contribute to a health savings account (HSA). The money you contribute to an HSA will reduce your ACA-specific modified adjusted gross income (MAGI), which determines your eligibility for premium subsidies. HDHPs pay for certain preventive care before the deductible, and no other services can be paid for by the health plan until the insured has met the deductible. The ACA requires that HDHPs pay for preventive care before the minimum allowable deductible is met. The monthly premium is usually lower, but you pay more health care costs yourself before the insurance company starts to pay its share.
| Characteristics | Values |
|---|---|
| Type of plan | High-deductible health plan (HDHP) |
| Savings account | Health savings account (HSA) |
| Plan eligibility | HSA-eligible |
| Plan costs | Lower monthly premium but higher out-of-pocket costs |
| Minimum deductible | $1,500 in 2025 |
| Maximum out-of-pocket costs | $9,450 for an individual in 2024, decreasing to $9,200 in 2025 |
| Coverage | In-network and out-of-network services |
| Preventative care | Covered before the deductible |
| Copays | Not allowed before the minimum deductible is met |
| Coinsurance | Used after the minimum deductible is met |
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What You'll Learn
HDHPs and HSA eligibility
A High-Deductible Health Plan (HDHP) is a type of health insurance coverage with a high deductible that meets specific Internal Revenue Service (IRS) guidelines. To contribute to a tax-advantaged Health Savings Account (HSA), a person must have coverage under an HDHP. HDHPs require policyholders to pay more out-of-pocket expenses before the health plan starts to pay for medical services.
HDHPs are the only plans that allow an enrollee to contribute to an HSA. High-deductible insurance is considered a type of consumer-driven health plan, so you may hear the term CDHP used in conjunction with these plans. The idea is to give patients control over how to spend and invest their money. You are not required to open or fund an HSA if you have an HDHP. Some employers that offer HDHPs also provide some HSA funding for their employees who enroll in the HDHP. However, if you have to fund the HSA yourself, it is optional to do so. If you have questions about this, you should consult a tax advisor to understand how funding an HSA might impact your overall financial situation. The money you contribute to an HSA will reduce your ACA-specific modified adjusted gross income (MAGI), which determines your eligibility for premium subsidies in the exchange.
The ACA Basic High-Deductible Health Plan meets the minimum essential coverage requirements under the federal health care reform, Affordable Care Act (ACA). The ACA Basic High Deductible Health Plan uses the Aetna Choice Network and offers coverage for both in-network and out-of-network services. Aetna will help you locate high-quality and cost-effective options for diagnostic services, lab draws, imaging, colonoscopies, and other services.
You can contribute to an HSA only if you have an HSA-eligible plan (also called an HDHP). HSA-eligible plans must set a minimum deductible and a limit, or maximum, on out-of-pocket costs for both individuals and families. The minimum deductible is the amount you pay for health care items and services per year before your plan starts to pay. The maximum out-of-pocket costs are the most you’d have to pay per year if you need more health care items and services. HSA-eligible plan deductibles are often significantly higher than the minimums and can be as high as the maximum out-of-pocket costs.
You may contribute your own money to your account by making a lump-sum contribution or periodic payments at any time, in any amount up to a maximum limit established by the IRS. Your trustee/custodian can impose minimum deposit and balance requirements. You can claim your total amount contributed for the year as an "above the line" tax deduction when you file your income taxes. Your own HSA contributions are either tax-deductible or pre-tax (if made by payroll deduction). You have until April 15 of the following year to make HSA contributions for the prior year. If you are between the ages of 55 and 65, you can make additional catch-up contributions of up to $1,000.
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Preventative care
A High Deductible Health Plan (HDHP) is a type of health insurance coverage with a high deductible that meets specific Internal Revenue Service (IRS) guidelines. The minimum deductible is the amount you pay for healthcare per year before your plan starts to pay.
The Affordable Care Act (ACA) requires HDHPs to cover certain preventive care services before the minimum allowable deductible is met. This means that certain preventive services are covered in full by all non-grandfathered health plans, with no copay for preventive services.
The four broad categories of services that must be covered for adults and children include:
- Evidence-based services with a rating of "A" or "B" in the current recommendations of the USPSTF, an independent panel of clinicians and scientists. Services in this category include screenings for depression, diabetes, obesity, various cancers, and sexually transmitted infections (STIs), prenatal tests, and medications that can help prevent HIV.
- Immunizations, such as wellness visits and vaccinations.
- Screening for chronic conditions.
- Telehealth benefits (through 2024, if the plan chose to offer this).
It's important to note that these services are only free when delivered by a doctor or other provider in your plan's network.
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Cost-sharing
The monthly premium for HDHPs is usually lower, but the trade-off is that individuals must pay more in healthcare costs themselves before the insurance company begins to pay its share. This is also known as the deductible. For example, with a $2,000 deductible, an individual pays the first $2,000 of covered services themselves.
HDHPs are unique in that they are the only plans that allow enrollees to contribute to a health savings account (HSA). HSAs are tax-advantaged savings accounts that allow individuals to set aside money on a pre-tax basis to pay for qualified medical expenses. The money contributed to an HSA will reduce an individual's ACA-specific modified adjusted gross income (MAGI), which determines eligibility for premium subsidies. It is important to note that HSA funds generally cannot be used to pay premiums.
The IRS has set specific guidelines for HDHPs, including minimum deductible requirements and maximum out-of-pocket costs. The ACA requires HDHPs to pay for preventive care before the minimum allowable deductible is met, and this preventive care must be covered in full with no cost-sharing for the insured. After the minimum allowable deductible is met, HDHPs can be designed with any type of cost-sharing until the maximum out-of-pocket limit is reached.
The maximum out-of-pocket costs for HDHPs have increased over time due to annual indexing. In 2024, the highest allowable out-of-pocket exposure for an individual was $9,450, including the deductible, coinsurance, and any other in-network out-of-pocket costs. This upper limit on out-of-pocket expenses is set to decrease to $9,200 in 2025.
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Out-of-pocket expenses
The ACA requires that out-of-pocket maximums be set for in-network essential health benefits (EHBs) covered under most health plans. These maximums include deductibles, copays, and coinsurance costs paid by consumers. For plan years starting on or after January 1, 2014, the ACA imposes an OOPM for in-network EHBs on all non-grandfathered group health plans, including HSA-qualified HDHPs. The maximum annual limits on cost-sharing for 2023 are $9,100 for self-only coverage and $18,200 for family coverage, increasing to $9,450 and $18,900, respectively, in 2024.
It is important to note that out-of-pocket maximums do not include health plan premiums, out-of-network costs, or spending on non-covered services. Additionally, dental and vision expenses are typically considered excepted benefits and do not accumulate towards the OOP limits.
High-deductible health plans (HDHPs) are a type of health insurance coverage with higher deductibles and out-of-pocket expenses compared to traditional plans. HDHPs require policyholders to pay more out-of-pocket expenses before the health plan starts to pay for medical services. However, HDHPs that are HSA-qualified have upper limits on out-of-pocket exposure, ensuring that out-of-pocket expenses do not exceed a certain amount. For 2025, the maximum out-of-pocket cap for HDHPs is expected to be $8,300 for single coverage and $16,600 for family coverage.
Overall, out-of-pocket expenses under a high-deductible plan refer to the costs that an individual must pay before their insurance plan contributes to the cost of healthcare services. The ACA imposes limits on these out-of-pocket expenses to ensure affordability and prevent excessive financial burden on individuals and families.
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IRS rules
A High-Deductible Health Plan (HDHP) is a type of health insurance coverage with a high deductible that meets specific Internal Revenue Service (IRS) guidelines. HDHPs are the only plans that allow enrollees to contribute to a Health Savings Account (HSA).
The IRS rules for HDHPs address the minimum deductible, the maximum out-of-pocket, and the Affordable Care Act (ACA) requirement that an HDHP must pay for preventive care before the minimum deductible is met. The minimum deductible is the amount you pay for healthcare items and services per year before your plan starts to pay. The maximum out-of-pocket costs are the most you would have to pay per year if you need more healthcare items and services.
The IRS has always limited out-of-pocket caps for HDHPs. The out-of-pocket maximums allowed under the ACA have increased each year, but the caps for HDHPs have increased at a slower rate. For example, in 2014, the out-of-pocket maximums for individual health plans under the ACA were the same as the limits on HDHPs: $6,350 for individuals and $12,700 for families. By 2024, the out-of-pocket maximum for an individual under the ACA had increased to $9,450, while the cap for HDHPs had only increased to $8,050.
In response to the COVID-19 pandemic, the IRS temporarily relaxed the rules to allow HDHPs to pay for COVID-19 testing and treatment pre-deductible without compromising the plan's HSA eligibility. This provision ended at the end of 2024. The IRS has also expanded the list of preventive services that can be paid for by an HDHP pre-deductible.
To contribute to an HSA, an individual must have coverage under an HDHP. HSA-qualified high-deductible plans have upper limits on out-of-pocket exposure, as required by the ACA. Very high-deductible plans are no longer allowed under the ACA.
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Frequently asked questions
A high-deductible health plan (HDHP) is a type of health insurance coverage with a high deductible that meets specific Internal Revenue Service (IRS) guidelines.
A high deductible plan can be identified by its higher deductible than a traditional insurance plan. This means that you pay more health care costs yourself before the insurance company starts to pay its share.
A high-deductible plan is also called an HSA-eligible plan when it is combined with a health savings account (HSA). This allows you to pay for certain medical expenses with money you set aside in your tax-free HSA.
The out-of-pocket costs for an individual HDHP under the ACA were \$6,350 for individuals and \$12,700 for families in 2014. These caps are indexed annually, so the out-of-pocket maximums allowed under the ACA have increased each year.
