If you’ve ever shopped for health insurance—especially as a small business owner or individual—chances are you’ve come across the term High-Deductible Health Plan (HDHP). But what exactly is an HDHP? And why does it matter for your health and financial planning?
Let’s break it down.
Defining a High-Deductible Health Plan
A High-Deductible Health Plan, or “HDHP”, is a health insurance plan with lower monthly premiums and higher deductibles than traditional health plans. Simply put: you pay less each month, but you’ll pay more out-of-pocket when you need care until you hit your deductible and out-of-pocket maximum.
For the 2025 tax year, the IRS defined an HDHP as any plan with:
- A deductible of at least $1,650 for individuals or $3,300 for families
- A maximum out-of-pocket limit of $8,300 for individuals or $16,600 for families
These thresholds adjust annually, but the idea remains consistent: you share more of the upfront cost in exchange for lower premiums.
Why HDHPs Matter: The HSA Advantage
So why would someone choose an HDHP? One big reason is unlocking the ability to contribute to Health Savings Accounts (HSAs).
If your health plan qualifies as an HDHP, you become eligible to open and contribute to an HSA, a tax-advantaged savings account you can use for medical expenses. Here’s why that matters:
- Triple Tax Advantage: HSA contributions are tax-deductible, the funds grow tax-free, and withdrawals for qualified expenses are also tax-free.
- No “Use It or Lose It” Rule: Unlike FSAs and some HRAs, unused HSA funds roll over year after year—and can even be invested.
- Long-Term Savings: You can treat an HSA like a “medical 401(k)”—a powerful tool to save for future healthcare costs, even in retirement.
For individuals who are generally healthy and want to take more control over how they spend on care, pairing an HDHP with an HSA can be a smart move.
Who Should Consider an HDHP?
HDHPs aren’t the right fit for everyone, but they make a lot of sense in certain situations:
- Young, healthy individuals who don’t expect many medical expenses
- Self-employed professionals or small business owners looking to reduce monthly costs
- Savvy savers who want to leverage an HSA for long-term wealth building
- Employees with employer HSA contributions (i.e., you get money from your employer in your HSA to offset that high deductible)
Of course, if you anticipate significant medical needs, a traditional plan with a lower deductible might be a better fit. But for many, the cost-savings potential of an HDHP-HSA combo is worth exploring.
How LegUp Health Can Help
At LegUp Health, we specialize in helping small businesses and their employees navigate health insurance options, including HDHPs and HSAs. Whether you're exploring plans for yourself or evaluating benefits for your team, we’re here to help you make a smart, confident choice.
Need help deciding if an HDHP is right for you? Schedule a free consultation with one of our licensed advisors today.
