Getting to know your high-deductible health plan

If your company offers you a high-deductible health plan, also known as an HSA-eligible plan, as an option, it's a good idea to become familiar with how it works. The first question people often have is how it differs from a traditional health plan. Here is a quick comparison:

HDHP versus a traditional health plan

 High-deductible health plan
Typically are lower.
True to its name, the deductible is higher. Plans will vary, but generally a minimum of $1,300 for individuals and $2,600 for families1.
Out-of-pocket limits are higher in an HDHP. For 2017, those limits are $6,550 for an individual plan, and $13,100 for a family plan.
Yes. Another name for an HDHP is an “HSA-Eligible” Plan. Saving in an HSA can help you cover out-of-pocket expenses, and your employer may match your contributions.

Conquer your HDHP concerns

When it comes to HDHPs, knowledge is power. Be aware of the facts so you can make an HDHP work for you. If you're considering an HSA-eligible plan, you may have some concerns:

 The reality
HDHPs can be less expensive:
  • Lower premiums. Your monthly premiums are generally lower, but you do need to budget for your out-of-pocket costs such as deductibles. If you don’t use your insurance frequently, an HDHP generally offers the most cost savings.
  • Know what is included at no cost. Preventive care such as a physical, well-child visit, vaccination or mammogram are covered at 100%, without a copay.
  • You can work the HSA angle. When you place the difference between the monthly premium in the HDHP and traditional coverage into an HSA, you are pocketing the savings. Over time this can add up and you’ll have a balance to use for medical expenses if needed.
  • Leverage the tax breaks. The HSA that comes with an HDHP offers a triple tax advantage2 that helps you save on taxes:
    1. Your HSA contributions are made pre-tax.
    2. Interest and any investment earnings in the account are tax-free.
    3. Your payments for qualified medical expenses are tax-free.
  • Take the HSA match. Some employers match contributions to HSAs. If yours does, you are leaving money on the table by not participating.
  • It’s actually pretty simple. The main difference is you pay a higher deductible, which is offset by the lower premiums you pay.
  • You can learn as you go. Typically your understanding will increase after the first year. “The longer people are in the plans, the less complicated they are,” says Paul Fronstin from the Employee Benefit Research Institute3.
  • Use resources available to you. There are many tools to learn more, especially on this site. Use our calculator to compare costs between a traditional plan and an HDHP, or check out the HSA Guide for more details on using an HSA.
  • Learn more from those in the know. HSA–eligible plans are growing in popularity. Chances are, you may have a close friend or colleague who you can talk to about how they use their HSA-eligible health plan.
  • You're covered for major medical expenses and preventive care is covered at 100%. The primary difference is that you have a higher deductible amount. Then, you can use an HSA to reimburse yourself for the out-of-pocket expenses, including the deductible and coinsurance.
  • Use it now or later. When HDHPs are paired with HSAs, it allows you to accumulate money to pay for qualified medical expenses now and in retirement.

How an HDHP works with an HSA

An HSA can be paired with a qualified high-deductible health plan and offers the opportunity to save for health care expenses. If you're enrolled in an HSA eligible plan, what you save in premium costs can help offset out-of-pocket expenses not covered by the plan, especially if you put those savings into an HSA.

For example, you might decide to save at least up to the cost of the plan's deductible, in case of any unexpected medical costs.

Many people are discovering the advantages of saving money with a HDHP paired with an HSA, especially for health care expenses now and in the future. Want to learn more? Discover if an HSA is right for you here.

1 Per IRS guidelines in 2017, an HDHP is a health insurance plan with a deductible of at least $1,300 if you have an individual plan – or a deductible of at least $2,600 if you have a family plan. The deductible is the amount you'll pay out of pocket for medical expenses before your insurance pays anything. In addition, the plan's out-of-pocket limit must be no higher than $6,550 for an individual plan or $13,100 for a family plan. The out-of-pocket limit is the most you'll have to pay in a year for medical expenses covered by your insurance plan.

2 About Triple Tax Advantages: You can receive tax-free distributions from your HSA to pay or be reimbursed for qualified medical expenses you incur after you establish the HSA. If you receive distributions for other reasons, the amount you withdraw will be subject to income tax and may be subject to an additional 20% tax. Any interest or earnings on the assets in the account are tax-free. You may be able to claim a tax deduction for contributions you, or someone other than your employer, make to your HSA. We recommend you contact qualified tax or legal counsel before establishing an HSA.

3 Gustke, Constance, "Will a high-deductible health plan save you money?" bankrate.com, January 20, 2011