Defining a high-deductible health plan (HDHP) seems like an easy task, but it’s not as easy as it seems.
What Is The Point of A High-Deductible Health Insurance Plan?
The point of an HDHP is to incentivize people to cover more of their health insurance costs themselves, instead of relying on health insurance companies to cover all of the costs. This leads to lower health insurance premiums because people don’t “use” their insurance as often, so it lessens the costs that the insurers incur.
How Does a High-Deductible Health Plan Work?
An HDHP works in essentially the same manner as other health insurance. However, they come with higher deductibles and higher maximum out-of-pocket cost limits vs. other health insurance plans.
In fact, to legally qualify as an HDHP, the deductible must be at least $1,650 for an individual plan and $3,300 for a family plan. The highest allowed out-of-pocket maximum is $8,300 for an individual plan and $16,600 for a family plan. These amounts are for 2025 and are adjusted every year.
If you have an HDHP, then you are eligible to contribute to a Health Savings Account (HSA). This allows you to save the money you may need to cover the higher costs you may incur. Better yet, if you don’t use the money for healthcare costs this year, your HSA can grow tax-free over time so that it can be used for your healthcare costs during your retirement.
Warning
Be careful. It’s possible to have a plan with a high deductible, but if the out-of-pocket maximum exceeds the thresholds, it does not qualify as an HDHP. For example, in 2025, if you have a family plan with a $3,300 deductible and a $20,000 maximum-out-of-pocket provision, it does not qualify as an HDHP because the out-of-pocket maximum is too high. And if it doesn’t qualify as an HDHP, then you are not eligible to contribute to an HSA this year.
Healthcare costs and health insurance costs have been increasing at a high rate for a number of years. Therefore, they have become a larger part of nearly everyone’s financial condition and outlook. They are also complicated to understand, and complex and shifting income tax treatment of health insurance and healthcare costs further complicates issues for everyone. But accounting for these is an important part of a comprehensive financial plan, especially for real estate brokers and other self-employed people.
At Dominion Financial Advisors, we can help you review and understand how health insurance can fit into your full financial picture. Schedule a complimentary consultation to help give you greater certainty and peace of mind about your outlook.