Your Comprehensive Guide to High Deductible Health Plans

High-deductible health plans (HDHPs), also known as HDHP insurance, are becoming an increasingly common option during open enrollment — but for many people, they’re still confusing. What makes a health plan “high deductible”? Is it risky? Is it worth it? And how does it tie into a health savings account (HSA)? 

This guide breaks down everything you need to know about HDHPs: how they work, who they’re for, what the pros and cons are, and how they can be paired with an HSA to unlock extra savings and flexibility. Whether you're comparing plans for the first time or just want to understand your options more clearly, you're in the right place.

What Is an HDHP (High-Deductible Health Plan)?

A high-deductible health plan (HDHP) is a type of health insurance that has higher upfront costs before coverage starts. In return, HDHPs usually have lower monthly premiums and can be paired with a Health Savings Account (HSA) to help save for medical expenses tax-free.

HDHP vs traditional health insurance

Unlike traditional health plans (like PPOs or copay-based plans), HDHPs don’t cover most routine services until you've met your deductible. However, they are still required to cover preventive care — like annual checkups, cancer screenings, and vaccines — at no cost to you, even before your deductible is met.

* PPO plans are only HSA-eligible if they meet IRS rules for a high-deductible health plan (HDHP). That means the plan must have a higher deductible and out-of-pocket limit, and it can’t cover most care (except preventive services) until you’ve paid that deductible. These plans are usually labeled “HSA-eligible” or “HSA-compatible.” Most regular PPOs don’t qualify.

What makes a plan an HDHP?

Each year, the IRS sets minimum deductible and maximum out-of-pocket amounts for a plan to qualify as an HDHP. For 2025, the IRS defines an HDHP as any plan with:

• A deductible of at least $1,650 for self-only coverage or $3,300 for family coverage

• A maximum out-of-pocket limit no higher than $8,300 for self-only or $16,600 for family plans

These thresholds are what separate HDHPs from other plan types — and they also determine whether you’re allowed to open or contribute to an HSA.

What is a qualified HDHP?

A qualified HDHP is simply an HDHP that meets IRS requirements and makes you eligible to contribute to an HSA. Not all high-deductible plans are automatically HSA-qualified — the plan must meet both the deductible minimum and the out-of-pocket max limit, and it can't offer non-preventive coverage before you meet your deductible.

What does HDHP mean for HSA?

To open or contribute to a Health Savings Account (HSA), you must be enrolled in a qualified HDHP. HSAs offer powerful tax advantages: your contributions are tax-deductible, your savings grow tax-free, and withdrawals for qualified medical expenses are also tax-free. For many people, this makes pairing an HDHP with an HSA a smart way to save on healthcare and plan ahead for future costs.

What this means for you:

If you're considering an HDHP, it's important to understand the trade-off: you may have higher costs upfront, but if you're generally healthy or can pair it with an HSA, it can offer long-term value, flexibility, and savings.

How Does a High-Deductible Health Plan Work?

An HDHP plan works by requiring you to pay more out of pocket before your insurance begins covering most medical costs. In return, these plans typically offer lower monthly premiums and the ability to contribute to a Health Savings Account (HSA), which can help you save and pay for those higher upfront expenses tax-free.

What costs do you pay upfront with an HDHP?

With an HDHP, you’re responsible for 100% of your medical costs (except preventive care) until you meet your annual deductible. This includes expenses like doctor visits, prescriptions, lab work, and urgent care. After you meet the deductible, your insurance starts to share the cost through coinsurance or copays, until you reach your plan’s out-of-pocket maximum.

Example: If your deductible is $2,000, you’ll pay the full cost of most services until you’ve spent $2,000 in a year. After that, your insurance begins covering a portion of your costs.

When do HDHPs start covering care?

HDHPs begin covering the cost of most non-preventive medical services only after you've met your deductible. Once that happens, you typically pay a percentage of costs through coinsurance (e.g., 20%) until you hit your out-of-pocket maximum. After that, your insurance covers 100% of eligible expenses for the rest of the year.

Do HDHPs cover preventive care before the deductible?

Yes, all HDHPs are required by law to cover preventive care at no cost to you, even before you meet your deductible. This includes:

• Annual physicals

• Screenings like mammograms, colonoscopies, and cholesterol tests

• Immunizations

• Well-woman and well-child visits

These services are fully covered as long as you stay in-network — no copay, no coinsurance, and no out-of-pocket cost.

What this means for you:

An HDHP shifts more upfront cost responsibility to you — but when combined with an HSA, it can give you more financial control, lower premiums, and long-term tax advantages. It's a smart option if you're generally healthy or want to take a proactive approach to healthcare spending.

What Are the 2025 HDHP Deductible and Out‑of‑Pocket Limits?

The IRS sets annual minimum and maximum thresholds that define a health plan as HDHP—and whether it qualifies for a Health Savings Account (HSA). These limits also help users understand what costs they may incur in a year.

What is the minimum deductible for an HDHP in 2025?

For 2025, the IRS defines a high‑deductible health plan as one with:

• At least $1,650 deductible for self-only (individual) coverage

• At least $3,300 deductible for family coverage

These thresholds mark the lowest possible deductible that still qualifies the plan as an HDHP under IRS rules.

What is the out‑of‑pocket max for HDHPs in 2025?

The plan’s total out‑of‑pocket maximum (what you pay in deductibles, coinsurance, and copays—not premiums) must not exceed:

• $8,300 for self-only plans

• $16,600 for family plans

That cap protects you from excessively high total medical spending in a single year.

2025 HDHP Limits at a Glance

What is the minimum deductible for an HSA‑qualified plan in 2025?

A plan must meet these exact deductible and out‑of‑pocket limits to be considered HSA-qualified. If your plan meets or exceeds the $1,650/$3,300 deductible and caps out-of-pocket at or below the $8,300/$16,600 limit, then you are eligible to contribute to an HSA

What this means for you:

If you're considering a plan labeled as "HDHP," check the details against these 2025 IRS limits. Plans that meet both deductible and out-of-pocket maximum criteria not only qualify as HDHPs but also let you open or contribute to an HSA—unlocking powerful tax and savings benefits.

What Are the 2026 HDHP Deductible and Out‑of‑Pocket Limits?

The IRS sets annual minimum and maximum thresholds that define a health plan as an HDHP—and determine whether it qualifies for a Health Savings Account (HSA). These limits are adjusted annually for inflation and help consumers understand what potential costs they might face in a given year.

What is the minimum deductible for an HDHP in 2026?

For 2026, the IRS defines a high‑deductible health plan as one with:

• At least $1,700 deductible for self-only (individual) coverage

• At least $3,400 deductible for family coverage

These thresholds are the lowest possible deductibles that still qualify a plan as an HDHP under IRS rules for 2026.

What is the out‑of‑pocket max for HDHPs in 2026?

The plan’s total out-of-pocket maximum (which includes deductibles, copays, and coinsurance — but not premiums) must not exceed:

• $8,500 for self-only plans

• $17,000 for family plans

This cap ensures protection against extremely high medical costs within a calendar year.

2026 HDHP Limits at a Glance

What is the minimum deductible for an HSA‑qualified plan in 2026?

To be considered HSA-qualified, a plan must meet these exact deductible and out-of-pocket maximum thresholds. If your plan has at least a $1,700/$3,400 deductible and caps out-of-pocket spending at or below $8,500/$17,000, then you’re eligible to open and contribute to a Health Savings Account.

What this means for you:

If you're reviewing your plan options for 2026, compare your plan’s details to the IRS benchmarks above. A plan that meets both the deductible and out-of-pocket max criteria qualifies as an HDHP — unlocking

Who Should Consider an HDHP?

High-deductible health plans (HDHPs) aren’t the right fit for everyone — but for many, they offer a smart combination of lower premiums, tax-advantaged savings, and more control over healthcare spending. Whether an HDHP makes sense depends on your health needs, financial situation, and comfort with paying upfront for care.

Who is a good candidate for an HDHP plan?

You may be a good fit for an HDHP if:

• You’re generally healthy and don’t expect frequent doctor visits or prescriptions

• You want to pay lower monthly premiums

• You’re comfortable covering more upfront costs (like your deductible) out of pocket

• You’re interested in saving for healthcare tax-free through an HSA

• Your employer offers HSA contributions or other HDHP incentives

If you rarely meet your deductible under a traditional plan, an HDHP could help reduce your monthly costs while allowing you to save for the future.

Why would someone choose a high-deductible plan?

Many people choose HDHPs because they:

• Prefer lower monthly premiums

• Want more flexibility and transparency in their healthcare spending

• Like the idea of using an HSA to grow tax-free savings

• Are planning for future expenses, such as childbirth, surgery, or retirement healthcare

An HDHP may also be the best available plan through your employer — and if it comes with an HSA contribution, it could offer more value than a traditional PPO plan.

Should I choose a high-deductible health plan with an HSA?

If you’re eligible, pairing an HDHP with an HSA can be a strategic way to manage costs and build long-term savings. Your HSA can help cover your deductible and other out-of-pocket expenses, and any unused funds roll over year to year — meaning you don’t lose them if you don’t use them.

This combination can be especially beneficial if:

• You can afford to contribute to your HSA regularly

• Your employer contributes to your HSA

• You want to invest your HSA balance for future healthcare needs

Are HDHPs paired with HSAs only for health people?

No — but HDHPs are often more appealing to people who don’t expect frequent medical expenses. That said, many people with chronic conditions or ongoing care needs still choose HDHPs if:

• Their employer offers generous HSA contributions

• The premiums on other plans are unaffordable

• They value the flexibility and savings potential of an HSA

The key is understanding how much healthcare you typically use and whether you can handle the deductible if something unexpected happens.

What this means for you:

An HDHP might be a great fit if you’re looking to reduce premiums, save money tax-free in an HSA, and take more control of your healthcare budget. But it’s important to consider how often you use care — and whether you can cover your deductible — before enrolling.

What Are the Benefits of Choosing an HDHP?

High-deductible health plans (HDHPs) offer several advantages — especially when paired with a Health Savings Account (HSA). While they may not be the right choice for everyone, HDHPs can provide more flexibility, lower monthly costs, and long-term savings potential for many individuals and families.

Is it better to have high or low deductible health insurance?

It depends on your health needs and how you prefer to manage your healthcare spending. A low-deductible plan may be better if you expect regular medical care and want more predictable costs. But if you’re generally healthy, a high-deductible plan can save you money with:

• Lower monthly premiums

• More control over when and how you spend

• Eligibility to open and contribute to an HSA

Choosing between high and low deductibles isn’t just about risk — it’s also about how much flexibility and savings potential you want in your plan.

Why are HDHPs becoming more common?

HDHPs are gaining popularity because:

• Premiums are rising, and HDHPs help lower monthly costs

• More employers are offering HSA contributions as part of benefits packages

• People want more control over healthcare choices and spending

• Many consumers are willing to trade higher deductibles for the opportunity to save and invest through an HSA

The combination of lower premiums and long-term savings has made HDHPs appealing to a wider range of people than in the past.

How do HDHPs offer more control over healthcare spending?

HDHPs shift more decision-making to you — and for many people, that’s a good thing. With an HDHP:

• You’re more likely to shop around and compare prices for care

• You can use HSA funds to pay for qualified expenses on your own terms

• You decide how much to contribute to your HSA, and whether to save or invest those funds

This model gives people more visibility into what healthcare really costs — and more tools to manage those costs effectively.

Who benefits most from an HDHP with HSA?

The HDHP + HSA combination is especially valuable for:

• People who don’t use much healthcare and want to keep premiums low

• Savers who want to build a tax-advantaged fund for future medical expenses

• Individuals and families who want to invest their HSA balance for retirement

• People who can afford to pay the deductible if needed, but don’t want to overpay for insurance they rarely use

If your employer offers HSA contributions, that’s even more reason to consider an HDHP — it’s essentially free money that helps offset your deductible.

What are the long-term benefits of using an HSA with an HDHP?

When used consistently, an HSA offers triple tax advantages and long-term value:

• Contributions are tax-deductible

• Growth is tax-free

• Withdrawals for qualified medical expenses are tax-free

Plus, unused HSA funds roll over from year to year, and many providers (like Lively) let you invest your HSA balance once you reach a certain threshold. Over time, your HSA can become a powerful tool for:

• Covering future medical expenses

• Funding healthcare in retirement

• Reducing your taxable income

What this means for you: If you’re looking for a health plan that offers lower premiums, flexible spending, and long-term savings potential, an HDHP — especially when paired with an HSA — can be a smart and strategic choice.

What Are the Downsides of an HDHP?

While high-deductible health plans (HDHPs) offer lower premiums and long-term savings potential, they also come with important trade-offs. Understanding the risks — especially if you have unexpected medical needs or limited savings — is key to deciding whether an HDHP is right for you.

What is the main disadvantage of a high-deductible plan?

The biggest downside of an HDHP is that you pay more out of pocket before your insurance coverage kicks in. This means you may have to cover the full cost of services like doctor visits, prescriptions, or urgent care until you've met your annual deductible — which could be thousands of dollars.

Unlike traditional plans with fixed copays, HDHPs require you to pay the full negotiated rate for most services until that deductible is met.

What are the risks if you need a lot of care early in the year?

If you experience a serious illness, injury, or hospitalization early in the year, you could face a large, unexpected bill before your plan starts sharing costs. This can create financial strain, especially if you haven’t had time to build up savings or contribute to your HSA.

Even routine care can add up quickly — and without an HSA balance or emergency fund, you may need to pay out of pocket using after-tax dollars.

Can you afford an HDHP if you don’t have savings?

An HDHP can be risky if you:

• Don’t have enough saved to cover the deductible

• Can’t contribute regularly to an HSA

• Prefer the predictability of fixed copays

If you're living paycheck to paycheck or expect frequent healthcare needs, a traditional plan with higher premiums but lower out-of-pocket costs might be more manageable.

That said, some employers offset these risks by contributing to your HSA, giving you a starting balance to help cover early expenses.

How do HSAs offset the risk of a high-deductible plan?

HSAs help reduce the financial pressure of an HDHP by giving you:

• A dedicated savings account for medical costs

• Tax-free funds to cover deductibles, prescriptions, and other qualified expenses

• The ability to roll over unused funds and build a cushion year over year

Many people use HSA contributions — from themselves or their employer — to buffer against surprise bills. Over time, this can make an HDHP much more manageable, especially when paired with smart budgeting and planning.

What this means for you: If you don’t have savings or expect frequent medical expenses, an HDHP could lead to higher out-of-pocket costs. But with a funded HSA and a plan to build up your balance over time, you can reduce those risks and take full advantage of the flexibility an HDHP offers.

HDHPs and HSAs: A Powerful Healthcare Strategy

Pairing a high-deductible health plan (HDHP) with a Health Savings Account (HSA) is one of the most effective ways to manage upfront costs and build financial flexibility over time. While HDHPs shift more responsibility to you, HSAs help reduce that burden by giving you a dedicated way to pay for qualified expenses with pre-tax dollars.

How does an HSA help cover HDHP costs?

• Lower premiums, more control: HDHPs typically cost less per month than traditional plans. The savings from those lower premiums can be redirected into your HSA — giving you more control over when and how you spend on healthcare.

• Pre-tax savings: Contributions to an HSA are tax-deductible, grow tax-free, and can be withdrawn tax-free when used for qualified medical expenses.

• Flexibility: You can adjust your HSA contributions based on your needs. Planning for a surgery? Expecting a quiet year? Your contributions can flex with your situation.

• Long-term value: Funds in your HSA roll over year to year and can be invested — making it a powerful tool for retirement savings or future healthcare costs.

• Family flexibility: Even if you have self-only HDHP coverage, you can use your HSA to pay for eligible expenses for your spouse or dependents.

Example Scenario

If your HDHP deductible is $1,700 (individual) and you contribute the IRS maximum of $4,300 (2026 limit), you’ll have more than enough to cover your deductible — and additional tax-free funds for other medical expenses.

Want to explore HSA eligibility and contribution rules in more detail? Check out our full HSA guide.

Can you have an HSA with any insurance?

No — only HDHPs that meet IRS requirements qualify you to open or contribute to an HSA. Traditional PPOs, HMOs, Medicare, and most employer-sponsored plans are not HSA-eligible, even if they have high out-of-pocket costs.

If you're not sure whether your plan qualifies, check the deductible and out-of-pocket limits — or ask your provider directly.

Can I use my HSA to pay my HDHP deductible?

Yes — and that’s one of the primary ways HSAs support people with HDHPs. Whether your deductible is $1,650 or $3,300, your HSA funds can help you cover those costs using tax-free dollars. This makes the financial burden of an HDHP easier to manage, especially if you plan ahead.

Real-world scenario: Using your HSA to meet your deductible

Alex, age 32, is enrolled in an HDHP with a $2,000 deductible. She contributes $150 per month to her HSA and receives $500 annually from her employer. Early in the year, she breaks her wrist and needs outpatient surgery, totaling $2,400. Because she’s built up her HSA balance, she’s able to pay $1,800 using pre-tax dollars from her HSA and the remaining $600 from her emergency fund. After meeting her deductible, her plan begins covering care at 80%.

Why it matters: Without an HSA, Alex would’ve paid out of pocket with after-tax money. Instead, she used tax-free funds she saved ahead of time — making her HDHP easier to manage and less financially stressful.

Comparing HDHPs to Traditional Health Plans

Not sure what the difference is between an HDHP and a PPO? Or wondering how an HMO compares? You’re not alone — these terms can be confusing, especially during open enrollment.

Here’s a quick overview of what each type of health plan means:

• High-Deductible Health Plan (HDHP): A plan with lower monthly premiums but higher deductibles. You pay more out of pocket before your insurance starts covering most care. HDHPs can be paired with a Health Savings Account (HSA), which lets you save and spend money tax-free on medical expenses.

• Preferred Provider Organization (PPO): A traditional health plan that offers a large network of doctors and hospitals. PPOs let you see specialists without a referral and often cover some out-of-network care. They usually have higher premiums but lower deductibles.

• Health Maintenance Organization (HMO): A lower-cost plan with a smaller network of providers. You must choose a primary care doctor and get referrals to see specialists. HMOs typically don’t cover care outside the network unless it’s an emergency.

Each plan has different pros and cons depending on how often you go to the doctor, how much you want to pay each month, and whether you want the option to use an HSA.

HDHP vs PPO vs HMO: Quick comparison

Now that you understand how HDHPs and HSAs work together, let’s look at how HDHPs stack up against other common types of plans like PPOs and HMOs. The main difference lies in how you pay for care — and how much flexibility and financial control you want.

Key Takeaways:

• HDHPs are best for individuals or families who want lower monthly costs and more control over healthcare spending, especially when paired with an HSA.

• PPOs offer flexibility in choosing providers and out-of-network care, but typically come with higher premiums.

• HMOs are budget-friendly but limit provider choice and require referrals for most services.

Choosing the Right Plan with Confidence

By now, you’ve got a clear picture of what a high-deductible health plan (HDHP) is, how it works, and whether it could be the right fit for you. You’ve seen how it compares to PPOs and HMOs, and how pairing an HDHP with a Health Savings Account (HSA) can unlock tax savings, spending flexibility, and long-term value.

Health insurance isn’t one-size-fits-all — and that’s okay. The key is to choose a plan that fits your needs, your budget, and your peace of mind. Whether you go with an HDHP or a more traditional plan, what matters most is that you understand your options and feel confident in your choice.

If you already have an HDHP or are planning to enroll in one, you can open an HSA with Lively to start saving tax-free for healthcare costs. Contact our team to learn more about how an HSA can help you get the most out of your plan.

Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.