HIGH-DEDUCTIBLE HEALTH PLAN (HDHP)
Back to GlossaryDefinition
A type of health insurance coverage with a high deductible. To contribute to a 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.
Summary
A High-Deductible Health Plan (HDHP) is a health insurance plan that requires you to pay a larger amount out-of-pocket (the deductible) before your insurance begins covering medical expenses. Think of it as having a higher 'entrance fee' before your insurance kicks in. The trade-off is typically lower monthly premiums, and importantly, HDHPs are the only type of health plan that allows you to contribute to a Health Savings Account (HSA), which offers tax advantages for healthcare expenses.
Usage Context
Understanding HDHPs is crucial when learning about healthcare financing options, employee benefits packages, HSA eligibility, and making informed decisions about health insurance coverage during open enrollment periods.
Common Confusions
- Thinking that higher deductibles always mean worse coverage
- Confusing HSA eligibility requirements with general health plan features
- Believing that no services are covered before meeting the deductible (preventive care is typically covered)
- Mixing up deductibles with out-of-pocket maximums
- Assuming HDHPs are only for healthy people or those who rarely use healthcare
