What Is a High Deductible Health Plan (HDHP)?
<lingo>A high deductible health plan or HDHP is a type of health insurance plan. These plans have higher annual deductibles than most other health plans and are therefore considered a form of catastrophic coverage. This means the insured must pay more out-of-pocket for health expenses each year before their insurance company will begin paying claims. Often, enrollees never meet their deductibles. There are several advantages of HDHPs. First, they typically have lower monthly premium rates than plans with lower deductibles. Next, HDHPs still cover the cost of qualified preventative care services, as determined by the Affordable Care Act (ACA). Finally, HDHPs are eligible to be used with health savings accounts (HSAs).</lingo>
High Deductible Health Plans Clearly and Briefly Explained
According to the IRS and as of 2019, health plans with deductibles of at least $2,700 for families (or $1,350 for individuals) are considered high deductible plans.It is important that HDHP annual out-of-pocket expenses (not including premium payments) do not exceed $6,750 for families (or $2,700 for individuals). Keep in mind these parameters may change every year.
When it comes to out-of-pocket health care costs, including co-payments, high deductible health plans may be good or bad for the consumer. If many non-preventative health care costs are required, for example, having an HDHP can mean paying thousands of dollars out-of-pocket each year. On the other hand, if limited health care costs are necessary, lower monthly premiums can make HDHPs are good bargain.
<twitter>A high deductible health plan or HDHP is a type of health insurance plan. These plans have higher annual deductibles than most other health plans and are therefore considered a form of catastrophic coverage.</twitter>
Additionally, most HDHPs can be used with health savings accounts (HSAs). An HSA is technically a savings account, which allows the enrollee to pay qualified health costs with untaxed funds. The HSA balance and interest also grow tax-free. HSA owners can contribute as much or as little as they want to their HSA, up to a predetermined annual limit. However, money cannot be withdrawn from an HSA without being subjected to a penalty fee.
Not all health plans qualify to be used with HSAs. Only HDHPs that fall within the IRS-defined deductible and out-of-pocket expense limits qualify for this benefit.
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