Key takeaways:
A high-deductible health plan (HDHP) is health insurance that has a smaller monthly premium and a larger deductible.
The federal government defines the deductible amounts for plans to qualify as HDHPs. For 2026, the minimum deductible for an HDHP is $1,700 for individuals and $3,400 for families. In 2027, the minimum deductible is $1,750 for singles and $3,500 for families.
HDHPs typically cover preventive, in-network care in full, even before the deductible is met. Other medical services are covered once the deductible is met.
Because of recent policy changes, many HDHPs can cover telehealth visits before the deductible is met without affecting health savings account (HSA) eligibility. Starting in 2026, bronze and catastrophic Affordable Care Act (ACA) marketplace plans qualify as HSA-eligible HDHPs.
The enhanced Affordable Care Act (ACA) premium tax credits ended in 2025, which led to higher marketplace plan premiums beginning in 2026. Choosing a high-deductible health plan (HDHP) — whether within the ACA, through an employer plan, or from another source — is how some consumers keep monthly costs manageable. Many people will continue HDHP coverage or choose this option for the first time in 2027.
An HDHP has low monthly premiums while typically providing 100% coverage for in-network preventive services before you meet your deductible. Sounds good, right? But it’s not quite that simple.
An HDHP can save you money up front, but it also comes with higher out-of-pocket costs if you need medical care beyond routine checkups. Understanding how this type of plan works can help you decide whether an HDHP is the right fit for your budget and healthcare needs.
What is a high-deductible health plan (HDHP)?
An HDHP is health insurance with a high deductible and, typically, lower monthly premiums compared with other coverage options. A health plan deductible is the amount you pay out of pocket for medical care before your insurance begins cost-sharing. A premium is what you pay every month for your plan.
More specifically, an HDHP is a plan with a deductible that meets or exceeds the minimum amount set annually by the federal government.
How does a high-deductible health plan work?
A high-deductible health plan means having lower premiums, but paying a large amount out of pocket before your insurance starts sharing costs for covered healthcare. You pay out of pocket for covered services until you reach your deductible. This often means spending thousands of dollars before your insurance begins paying anything.
Once you reach your deductible, your insurance will share the costs of your medical care. The deductible is the first threshold. The second is when you reach your plan’s out-of-pocket maximum. At that point, your insurer will pay for all covered healthcare expenses at 100%.
Depending on your plan, you may have an in-network deductible and an out-of-network deductible in addition to an out-of-pocket maximum for in-network care. Make sure you understand how your expenses are counted toward your deductible(s) and out-of-pocket maximum.
HDHPs typically cover preventive care — such as annual wellness exams, vaccines, and screenings for certain health conditions — before you meet your deductible. If you are healthy, typically use mostly wellness services, and have only a few doctor visits a year, an HDHP can save you money through lower premiums.
Additionally, HDHPs qualify for a health savings account (HSA), which allows you to set aside pretax money to help pay for certain medical costs. An HSA can help lower your taxable income and pay for qualified healthcare expenses tax-free. That’s why this type of fund pairs well with an HDHP.
High-deductible health plans and HSAs
High-deductible health plans usually have lower monthly premiums than other types of health insurance plans. However, they require you to spend a large amount of money out of pocket to meet your deductible before your health plan begins cost-sharing.
Pairing an HDHP with an HSA allows you to save money for qualified healthcare expenses in a tax-advantaged account. Some employers also contribute to employee HSAs, making this type of account an even more attractive option.
Unlike with a flexible spending account (FSA), unused money in an HSA rolls over year after year. The account stays with you as you move jobs, allowing you to continue using its funds for qualified healthcare expenses.
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Money in HSAs accrues interest like other savings accounts. As a bonus, all HSA contributions, earnings, and spending on qualified medical expenses are tax-free. If you use the money from your HSA for anything else, you may have to pay a 20% tax penalty.
If you have an Affordable Care Act (ACA) marketplace bronze or catastrophic plan, you can open an HSA on your own. That’s because these plans were considered HDHPs as of 2026 and are eligible for HSAs.
What are the 2026 and 2027 IRS limits and rules for an HDHP?
To qualify as an HDHP in 2026, a plan must have a deductible of at least $1,700 for individual coverage or $3,400 for family coverage. To qualify as an HDHP in 2027, a plan must have a deductible of at least $1,750 for individual coverage or $3,500 for family coverage. These plans also have out-of-pocket spending maximums, which count what you spend on coinsurance, copays, and deductibles — but not premiums. In 2026, HDHP spending is capped at $8,500 for an individual and $17,000 for a family. In 2027, spending is capped at $8,700 for an individual and $17,400 for a family.
If you reach your out-of-pocket maximum, your plan will pick up 100% of the cost of covered services for the rest of the calendar year. But keep in mind that the limit does not apply to care outside your network.
The table below shows HDHP minimum deductibles and maximum out-of-pocket expenses for 2026 and 2027.
High-deductible health plan (HDHP) requirements
2027 | 2026 | |
|---|---|---|
Minimum deductible for an individual | $1,750 | $1,700 |
Minimum deductible for a family | $3,500 | $3,400 |
Out-of-pocket maximum expenses for an individual | $8,700 | $8,500 |
Out-of-pocket maximum expenses for a family | $17,400 | $17,000 |
What does a high-deductible health plan cover?
If you’re enrolled in an HDHP, your in-network preventive care is fully covered without you having to meet the deductible first. Because of this, a high-deductible plan can be a smart financial decision.
An HDHP may also cover some telehealth services, among other care considered preventive health services, before you meet your deductible — while allowing you to remain eligible for an HSA.
Advantages of high-deductible health plans
Here are some of the benefits of an HDHP:
Lower premiums: HDHPs typically have lower monthly premiums than health insurance plans with lower deductibles and lower out-of-pocket maximums.
Potential savings: If you’re relatively healthy and generally don’t have medical expenses beyond annual physicals and screenings, you’re likely to save money by opting for an HDHP over a lower-deductible plan. That’s because yearly checkups and screenings count as preventive services, which HDHPs typically cover before the deductible is met.
HSA access: When you are enrolled in a qualified HDHP, you can contribute to an HSA. Deposits are tax deductible, the money grows tax-free, and withdrawals for qualified medical expenses — such as hearing aids and prescription eyeglasses — are not taxed.
Employer benefits: Some employers make HSA contributions for employees with HDHPs, which is another potential perk.
The One Big Beautiful Bill Act expanded HSA eligibility beginning in the 2026 coverage year by reclassifying bronze and catastrophic ACA marketplace plans as qualifying HDHPs. Bronze plans are the lowest-cost ACA metal tier plans and typically come with higher deductibles. Catastrophic plans are very-high-deductible options available to people under 30 and those with a hardship or affordability exemption.
Disadvantages of high-deductible health plan
Yes, HDHPs keep monthly payments relatively low. But there are some downsides you should consider, including:
Large medical expenses: Since HDHPs generally cover only preventive care up front, an accident or emergency could result in very high out-of-pocket costs before and after your plan begins cost-sharing.
Future health risks: Because of the costs, you may skip or delay booking medical appointments, seeking diagnostic screenings, or filling prescription medications. This could ultimately lead to worsening health problems and even-more-costly care, such as hospitalization.
High deductibles: A KFF survey found that nearly half of U.S. adults said that affording healthcare costs is difficult. Meeting a high deductible can be especially challenging if you don’t have money set aside for medical expenses, but this could be offset by your savings in premiums if that money is saved for healthcare.
Is a high deductible or low deductible better?
Whether a plan with a high deductible or one with a low deductible is better for you depends on your individual needs. HDHPs typically have lower monthly premiums. These plans are ideal for people who are generally healthy and do not expect to visit a healthcare professional often. An HDHP can also be paired with an HSA. By contributing to an HSA, you can take advantage of triple tax benefits and save money on healthcare now and even during retirement. Your threefold tax benefits are:
Tax-deductible contributions that lower your taxable income for the year and can reduce your tax bill
Tax-free growth on investment earnings
Tax-free withdrawals when used for qualified medical expenses
Plans with lower deductibles may have higher monthly premiums. Like HDHPs, these plans usually cover preventive services up front, but you likely won’t have to pay as much out of pocket when you access additional care.
In short, if an HDHP covers your annual preventive care and you think that’s all you’ll need in a given year, it may make sense to enroll. But if you’re worried about needing other kinds of care, it may be a safer bet to pay more in premiums each month for a plan that offers more immediate access to cost-sharing coverage.
High-deductible health plans vs. PPOs
You may have the option to choose between an HDHP and a preferred provider organization (PPO) plan. These plans work differently, especially when it comes to costs. Here’s a chart comparing HDHP and PPO features to help guide your decision.
HDHPs vs. PPOs
HDHPs | PPOs | |
|---|---|---|
Annual deductible | Higher | Lower |
Monthly premiums | Lower | Higher |
Out-of-pocket maximums | Higher | Lower |
HSA eligibility | Typically can contribute | Cannot contribute |
Provider and facility network | Typically tighter | Typically larger |
Out-of-network coverage | Typically not covered | Covered in most cases |
Primary care physician requirement | Depends on plan | Not required |
Frequently asked questions
You should not use a high-deductible health plan if you have costly or unpredictable healthcare expenses. HDHPs require you to pay for all expenses out of pocket (besides certain preventive care) until you meet the deductible — which can be thousands of dollars. While plans with lower deductibles may have higher monthly premiums, you typically won’t have to pay as much out of pocket before your insurance company begins cost-sharing.
If you are healthy and don’t use a lot of healthcare services, a high-deductible health plan can save you money. HDHPs typically fully cover in-network preventive care without requiring you to meet your deductible. HDHP premiums are also usually lower than other health insurance plans, allowing you to save money, especially when paired with an HSA.
You should not use a high-deductible health plan if you have costly or unpredictable healthcare expenses. HDHPs require you to pay for all expenses out of pocket (besides certain preventive care) until you meet the deductible — which can be thousands of dollars. While plans with lower deductibles may have higher monthly premiums, you typically won’t have to pay as much out of pocket before your insurance company begins cost-sharing.
If you are healthy and don’t use a lot of healthcare services, a high-deductible health plan can save you money. HDHPs typically fully cover in-network preventive care without requiring you to meet your deductible. HDHP premiums are also usually lower than other health insurance plans, allowing you to save money, especially when paired with an HSA.
The bottom line
A high-deductible health plan (HDHP) may help you save money by allowing you to pay lower premiums and giving you access to a health savings account (HSA). This is especially true if you are generally healthy and the plan covers all of your routine care.
But HDHPs aren’t right for everyone. If you need ongoing medical care or face unexpected health issues, you may wind up spending more out of pocket with an HDHP. And while more Affordable Care Act (ACA) marketplace plans qualify as HDHPs as of 2026, your best bet is to crunch the numbers based on your budget and health status to determine the right option for you.
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References
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