What is a 'High-Deductible Health Plan - HDHP'

A health insurance plan with a high minimum deductible that the insurance holder must pay for medical expenses before insurance coverage kicks in. The minimum deductible for a plan to fall into the category of an HDHP varies each year. For 2017, it was $1,300 for individuals and $2,600 for families. In 2018, it rises to $1,350 for individuals and $2,700 for families.

BREAKING DOWN 'High-Deductible Health Plan - HDHP'

These health plans became more common when the new health savings account (HSA) legislation was signed into law in 2003 [see Pros and Cons of a Health SAvings Account (HSA)]. In order to open an HSA account, an individual must first have an HDHP. These high-deductible health plans are thought to lower overall healthcare costs by forcing individuals to be more conscious of medical expenses.

The higher deductible also lowers insurance premiums, making health coverage more affordable. This benefits healthy people who need coverage mostly in case of a serious health emergency and can take advantage of HSA savings for retirement as well as any health needs now.

For wealthy families who can afford to self-insure, an HDHP gives them access to HSA tax-advantaged savings (see High-Income Benefits From a Health Savings Account and Why HSAs Appeal More to High-Income Earners).

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