high deductible health plan HDHP

Excessive Deductible Well being Plan (HDHP) Fundamentals for 2023 & 2024


This text has been up to date for the 2023 & 2024 tax years. I beforehand talked about that I had moved to a brand new excessive deductible well being plan (HDHP) that my employer began providing throughout open enrollment. I’ve had a couple of questions since that declaration from individuals who have been curious to know extra about HDHPs and I believed it might be helpful to dedicate an article in direction of the subject. On this article we’ll cowl HDHP fundamentals: what they’re, deductible quantities, out-of-pocket maximums, HSA eligibility, and extra.

What’s a Excessive Deductible Well being Plan (HDHP)?

An HDHP is a kind of medical health insurance plan that gives decrease month-to-month premiums than extra conventional plans like PPOs or HMOs in trade for the next deductible – therefore the identify “excessive deductible well being plan”.

They’re often paired with a well being financial savings account (HSA) that enables you and/or your employer to make tax deductible contributions to. You possibly can later use the HSA to pay to your medical bills, tax free. And HSAs are a major enchancment over FSAs. Extra on HSAs later.

What are HDHP Minimal Annual Deductibles?

A medical health insurance deductible is the quantity that you will need to pay earlier than medical health insurance kicks in and begins paying. The deductible is an annual quantity that often resets at the start of the calendar yr.

When you’ve hit your annual deductible, then your insurance coverage kicks in and begins serving to. The HDHP might pay 80%, 90%, 100%, and so on. of your well being care prices at that time – it should range primarily based in your particular person plan.

The minimal HDHP annual deductible quantity as dictated by the IRS are to ensure that a plan to be characterised as an HDHP are:

2023 minimal HDHP annual deductible:

  • $1,500 per particular person
  • $3,000 per household

2024 minimal HDHP annual deductible:

  • $1,600 per particular person
  • $3,200 per household

If in case you have an HDHP, your insurance coverage won’t kick in till you hit at the least these minimums. Some HDHPs might have larger deductibles than this.

What are the HDHP Out-of-Pocket Maximums?

A HDHP out-of-pocket most, or OOPs, is the utmost quantity you or your loved ones are required to pay in any given yr, earlier than the HDHP covers any further medical prices 100%.

That is necessary as a result of when you have a excessive value occasion or collection of occasions (e.g. automobile accident, coronary heart surgical procedure, maternity), your out-of-pocket most protects you from severe monetary hardship and potential chapter.

The IRS HDHP most annual out-of-pocket limits for deductibles/co-pays for 2023 are:

2023 HDHP Most Out of Pocket Restrict (ACA-compliant):

  • Single Plan: $9,100
  • Household Plan: $18,200

2023 HDHP Most Out of Pocket Restrict (HSA-qualified):

  • Single Plan: $7,500
  • Household Plan: $15,000

And the IRS HDHP most annual out-of-pocket limits for deductibles/co-pays for 2024 are:

2024 HDHP Most Out of Pocket Restrict (ACA-compliant):

  • Single Plan: $9,450
  • Household Plan: $18,900

2024 HDHP Most Out of Pocket Restrict (HSA-qualified):

  • Single Plan: $8,050
  • Household Plan: $16,100

What are HSA Most Contribution Limits when you have an HDHP?

Bear in mind, HDHPs are tied to HSAs, and with that comes the power to contribute to a tax-deductible account. And the HSA contribution deadline for a tax yr is similar date because the tax deadline (usually April 15 of the next calendar yr). The IRS HSA most contribution limits for 2023 and 2024 are:

2023 Most HSA Contribution Limits

The utmost HSA contribution quantities for 2023 are:

  • Particular person Plan: $3,850 (+$200 over prior yr)
  • Household Plan: $7,750 (+$450 over prior yr)

2024 Most HSA Contribution Limits

The utmost HSA contribution quantities for 2024 are:

  • Particular person Plan: $4,150 (+$300 over prior yr)
  • Household Plan: $8,300 (+$550 over prior yr)

These most contributions ranges embrace each employer and worker contributions.

As with 401Ks there’s a catch up contribution for these age 55 and over. They’re as follows:

2023 & 2023 HSA catch-up contribution:

  • $1,000 for people
  • $2,000 for household plans (with 2 people age 55+)

These are the utmost contributions ranges allowed by the IRS. Your HSA plan maximums could also be decrease, as employer plan quantities might range.

Is an HDHP the Greatest Choice for me?

It relies upon. HDHPs are typically nice for these beneath 50 who haven’t any severe documented well being issues as a result of the month-to-month premiums will be considerably decrease than conventional HMO and PPO plans.

And if you happen to’re in good well being, your out-of-pocket bills are probably going to be low. I finally made the change as a result of I’m younger and haven’t had greater than 1 or 2 physician visits in any given yr within the final decade (knock on wooden). Which means that I in all probability haven’t spent quite a lot of hundred $ in any given yr on well being associated prices.

I’m additionally within the scenario the place my employer gives an HSA with their HDHP and contributes an quantity equal to my annual deductible to it. Something I don’t spend rolls over yearly, and in a couple of years I’d have sufficient to cowl an annual out of pocket most. Plus my premiums are decrease with the HDHP vs. a PPO. So it makes a whole lot of sense for me.

These are the issues you have to be contemplating when deciding to change to a excessive deductible plan:

  • What’s my current well being?
  • What’s going to my annual deductible be?
  • How do the premiums examine to a typical plan?
  • What’s the most out-of-pocket?
  • The place can I discover a HDHP?

In case you are younger and wholesome, it’s typically financially helpful to view medical health insurance as a method to cowl you within the occasion of very excessive value occasions versus a technique to minimize the prices that will sometimes come up as a result of you could find yourself paying extra to your premiums than you’re saving.

The place can I Discover HDHPs?

Verify to see in case your employer gives a HDHP and what the related premium, deductible, and maximums are. Some employers supply HDHPs, others don’t.

Even when your employer does supply one, ALWAYS examine it to what’s out there on the free market. In lots of circumstances it is possible for you to to discover a cheaper various than what your employer gives.

If you happen to’re self-employed, examine the general public medical health insurance trade at healthcare.gov for public plans. It’s possible you’ll be eligible for a authorities subsidy with these plans.

Observe that HSAs usually are not tied to HDHPs. Your employer might supply an HSA to contribute to, however it’s not tied to your HDHP and the HSA is owned by you, not your employer. I’ve compiled a record of the perfect HSA accounts for readers. You possibly can switch funds from any HSA (even ones nonetheless administered by your employer) to some other HSA at any time. And it’s best to, as some HSAs are terrible.

HDHP Dialogue:

  • Do you’ve an HDHP? How lengthy have you ever had it? What has your expertise been?
  • What are your HDHP premiums, deductibles, and maximums?

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