High-deductible Health Plan (HDHP)

A High-Deductible Health Plan (HDHP) is a type of health insurance plan that typically features lower premiums but higher deductibles compared to traditional health plans. HDHPs are often paired with Health Savings Accounts (HSAs) or Flexible Spending Accounts (FSAs) to help individuals cover out-of-pocket medical expenses.

Example #1

For example, an employee may choose an HDHP that has a lower monthly premium but requires them to pay a higher deductible before the insurance starts covering costs.

Example #2

An HDHP may have a deductible of $3,000, meaning the individual will need to pay the first $3,000 of medical expenses out of pocket before the insurance coverage kicks in.

Misuse

One possible misuse of HDHPs is when employers offer them as the only health insurance option without considering the financial strain it may put on employees, especially those with lower incomes or chronic health conditions. It's important to protect against this misuse by ensuring that employees have access to affordable healthcare options that meet their needs.

Benefits

One of the benefits of HDHPs is that they can empower individuals to take more control of their healthcare spending. By offering lower monthly premiums, individuals can save money on insurance costs and use HSAs or FSAs to save pre-tax dollars for medical expenses.

Conclusion

In line with CAP's goals of empowering consumers and promoting fairness, it's essential to educate individuals about the pros and cons of HDHPs, ensuring they have access to suitable healthcare options that align with their financial circumstances and healthcare needs.

Related Terms

Health Savings Account (HSA)Flexible Spending Account (FSA)