High-Deductible Health Plan (HDHP)
What it is:
The dollar limits on HDHPs change often (the government thresholds are indexed for inflation). HDHPs are growing in popularity because they help employers limit insurance costs (they have lower premiums) and because they allow people to open Health Savings Accounts (HSAs). HSAs are tax-deferred accounts that allow people to save money to pay the deductibles on their HDHPs.
How it works/Example:
Let's say John Doe has a high-deductible health plan. His policy has a $2,000 deductible, which means that if he has a $10,000 surgery, he must pay the first $2,000 before the insurer will cover the rest.
Why it matters:
A high-deductible health plan (HDHP) is a health insurance plan that has a high minimum deductible and usually does not cover all of the insured's medical costs.