What Is High-Deductible Health Plan (HDHP)?
A health insurance plan with a higher deductible that qualifies the holder to contribute to an HSA.
The Full Definition
A High-Deductible Health Plan (HDHP) is a health insurance plan with a higher annual deductible than a traditional plan, in exchange for lower monthly premiums. HDHPs are the only plans that qualify an individual to open and contribute to a Health Savings Account (HSA) — one of the most tax-advantaged accounts available. The tradeoff is straightforward: lower premiums and HSA eligibility versus paying more out of pocket before insurance coverage kicks in, which makes HDHPs a better fit for generally healthy people who can absorb the higher deductible if needed.
Real-World Example
A family choosing an HDHP with a $3,500 deductible instead of a traditional plan with a $1,000 deductible pays lower monthly premiums and unlocks HSA eligibility — but takes on more out-of-pocket risk if a major medical expense arises.