Daniel Stewart

Will I Spend More Money on Medical Bills if I Get an HDHP?

A high deductible health plan (HDHP) is a type of insurance plan that many people opt to get because of its upfront premium savings. As the name suggests, an HDHP comes with a higher deductible and out-of-pocket maximums. The tradeoff is the lower monthly premiums.

As of 2024, the IRS defines an HDHP as a health plan with a deductible of at least $1,600 for individuals and $3,200 for families. To qualify as an HDHP, out-of-pocket maximums can't exceed $8,050 for individuals and $16,100 for families.

While you save monthly, the out-of-pocket maximum figure can be daunting. But does that mean you'll spend more on medical bills with an HDHP?

Who's an HDHP For?

A high deductible health plan isn't for everyone, but it benefits for many reasons. Many opt for these policies when they don't believe they'll need much medical care during the year. For example, they're popular among young and relatively healthy people.

Those with chronic conditions or people who think they'll need significant medical care may want to reconsider an HDHP. In those cases, you may spend more money on medical bills.

HDHPs still include preventative care services from in-network providers, per the Affordable Care Act. That means you can still get 100 percent coverage for several services before you even touch your deductible. But when you need serious medical care, you must cover your deductible before you get coverage.

The good news is that the most you'll pay out of pocket is $7,500 for individuals and $15,000 for families.

HDHPs and HSAs

People with HDHPs can avoid spending more on medical bills by having a health savings plan (HSA). HSAs are unique savings accounts with several tax advantages. Having an HDHP is one of the biggest qualifiers for opening an HSA. If you don't have an HDHP, you can't contribute to an HSA.

HSAs are similar to retirement plans. You can contribute up to the annual limit, invest your funds and create a tax-advantaged nest egg exclusively for paying qualified medical expenses.

Author Resource:-

Daniel Stewart has been helping people with their money management and personal finance with over 15 years' experience in business finance. You can find his thoughts at HSA investment tips blog.