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A high deductible health plan (HDHP) is a plan with a higher deductible than traditional health insurance. The premiums may be lower, but you have to meet a higher deductible (payout of pocket for more health care costs) before your coverage kicks in. An HDHP is often combined with a health savings account (HSA), which allows you to set aside pre-tax dollars to pay for medical expenses, reducing your federal income tax bill.
The IRS has a specific definition for a high deductible health plan that may be amended annually. For 2022, an HDHP is defined as any health plan with a deductible of at least $1,400 for an individual or $2,800 for a family, as stated on HealthCare.gov. Total yearly out-of-pocket expenses may not exceed $7,050 for an individual or $14,100 for a family. This includes deductibles, coinsurance, and copayments but does not include health insurance premiums. The out-of-pocket maximum does not apply to costs of health care received out of the health plan’s network.
The key advantages of an HDHP are:
If you are not anticipating many medical expenses for the coming year, choosing a high deductible health plan with lower premiums might make sense. Choosing an HDHP also makes you eligible to contribute to a health savings account, reducing your taxable income. You can use HSA pre-tax dollars to cover medical costs before you meet your deductible and for coinsurance or copayments once the deductible is met.
Another advantage of an HDHP is that it provides 100% coverage before you meet your deductible for preventative health care services from in-network providers. This is a requirement under the Affordable Care Act. For services under the preventative care category, you are not responsible for any coinsurance or copayments. Preventative services covered 100% include:
A high deductible health plan may be the best choice for young and healthy individuals who are not on prescription medications, do not have young children, and are not planning to start a family. Young children tend to visit doctors more frequently, and the costs of hospital childbirth are high. Our agent can advise you of your options and help you choose the best health plan for you and your family.
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