What does "high-deductible health plan" (HDHP) refer to?

A high-deductible health plan (HDHP) is defined by its structure, which includes higher deductibles than traditional health insurance plans. These plans typically require individuals to pay a substantial amount out-of-pocket for healthcare services before the insurance company begins to pay. What sets HDHPs apart is their association with Health Savings Accounts (HSAs), which allow individuals to save money tax-free for qualified medical expenses. This pairing provides a financial incentive for individuals to engage in cost-effective healthcare decision-making and to manage their health care expenditures more actively.

The emphasis on higher deductibles means that premiums for HDHPs are generally lower compared to plans with lower deductibles, making them an attractive option for healthy individuals who anticipate fewer medical expenses. By choosing a plan with a high deductible, consumers can enjoy lower premium costs while having the option to build savings through HSAs for future medical needs. This combination is what defines the high-deductible health plan.