HDHP (High-Deductible Health Plan).

In plain English

A High-Deductible Health Plan (HDHP) is an IRS-defined category of health insurance with a higher minimum deductible and a capped out-of-pocket maximum. For 2026, the IRS requires self-only HDHP coverage to have at least a $1,700 deductible and at most an $8,500 annual out-of-pocket maximum; family HDHP coverage requires at least a $3,400 deductible and at most $17,000 OOP max. Only HDHPs make a person eligible to contribute to a Health Savings Account (HSA). Premiums are usually lower than traditional plans, but out-of-pocket costs hit harder before coverage kicks in.

01Why it matters

An HDHP plus a maxed HSA is one of the most tax-advantaged setups available to a typical W-2 employee: a triple tax benefit (deductible going in, tax-free growth, tax-free withdrawals for qualified medical expenses) combined with lower premiums. The catch is real: in a year of unexpected medical needs, the higher deductible means thousands more out-of-pocket before insurance pays. The HDHP plus HSA math works best for relatively healthy people with the cash flow to absorb a bad year.

02The math, step by step

Employee compares two plans: a traditional PPO at $350 per month with a $1,000 deductible, and an HDHP at $150 per month with a $2,500 deductible (self-only). The HDHP saves $200 per month ($2,400 per year) in premium, available to redirect to the HSA. In a healthy year, the HDHP wins by about $2,400. In a year with a $4,000 medical bill, the HDHP costs roughly $1,300 more out of pocket than the PPO, but $2,400 in premium savings net out to about $1,100 ahead. The break-even depends on actual medical spend.

03What this is NOT

04Receipts

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