What Is an HDHP, and How Does It Work?

Gil Mahler

4 days ago

2 min read

A High Deductible Health Plan, or HDHP, sounds scary. "High deductible" makes people think of big bills. But for many people, an HDHP can save money. The trick is understanding how it works.

The basic idea

An HDHP makes a simple trade:

You pay less every month. HDHPs usually have lower premiums.
You pay more before insurance helps. HDHPs have a higher deductible.

So you pay less up front, but you take on more of the cost when you get care.

What counts as "high"?

The government sets the rules for what counts as an HDHP. For 2027, a plan must have a deductible of at least:

$1,750 if it covers just you
$3,500 if it covers your family

The government also caps how much you can pay in a year. For 2027, your out-of-pocket maximum can't be more than $8,700 for just you, or $17,400 for a family. These numbers go up a little each year.

Some care is covered right away

Even with an HDHP, many things are covered before you meet your deductible:

Preventive care, like yearly checkups, many screenings and vaccines
Telehealth visits on many plans, which are doctor visits by phone or video

The secret weapon: the HSA

Most HDHPs let you open a Health Savings Account (HSA). An HSA is a savings account just for health costs. Money you put in isn't taxed. It grows without taxes. And you can take it out tax-free for medical costs.

Many employers add money to your HSA too. Some put in a flat amount to get you started, often called a seed. Others match what you put in, up to a limit. Before you pick a plan, ask your HR or benefits team if your employer does either, and how much you’d need to put in to get the full match. The yearly limit counts your money and your employer’s together. For 2027, it’s $4,500 for just you or $9,000 for a family.

Unlike some accounts, your HSA money is yours to keep, even if you change jobs.

Meet Alex

Alex can pick a PPO that costs $250 a month or an HDHP that costs $100 a month. By choosing the HDHP, Alex saves $150 a month, or $1,800 a year. Alex puts that $1,800 into an HSA.

In April, Alex needs an $800 MRI. Alex pays for it with HSA money, tax-free. At the end of the year, Alex still has $1,000 left in the HSA, and it can grow with them for the rest of their life, tax-free.

Is an HDHP risky?

It can be if you don't plan. If you have a big medical bill early in the year, you might pay a lot before insurance helps. That's why it's smart to save in your HSA and know your out-of-pocket maximum.