What is a High Deductible Health Plan (HDHP)

The health insurance sector went through a round of major changes in the past decade. One remarkable event which changed a lot of things in the health care scenario was the introduction of Health Savings Accounts (HSAs), which in turn led to the popularization of 'High Deductible Health Plans'. The aim of writing this article on Buzzle is to explain what such plans are and what sets them apart from conventional health care plans. We will also discuss how HDHPs are connected with health savings accounts, along with the discussion of the pros and cons of opting for them.

Every one of us needs health insurance, as we are all vulnerable to health problems that keep cropping up unexpectedly. So whether or not we need an insurance is not a question of debate, but what kind of insurance plan to opt for is certainly a question worth pondering. There are a range of health insurance plans offering varying amount of health cover, according to which, the size of insurance premiums vary. You need a plan which adequately covers your health risks, while still offering affordable premiums.

One of the factors which decides how large insurance premiums will be, is the maximum deductible value, after which an insurance cover actually kicks in. Deductible is the minimum amount of medical expenses that an insurance holder pays for, before his or her insurance cover starts paying for the expenses. With that basic overview of the characteristics of any health insurance plan, we can discuss what is a high deductible health insurance plan and how it's connected with a health savings account.

About High Deductible Health Plans

As the name itself suggests, this types of a plan is characterized by a high amount of minimum deductibles and a low amount of insurance premium. Since the creation of health savings accounts through a US Government Act passed in 2003, under the Bush administration, the popularity of HDHPs among health insurance seekers is on the rise. That is because, one needs such a plan to open a health savings account, which lets you save money tax free, to pay for your medical expenses. HDHPs were created out of a need to provide affordable health insurance. For the year 2011, any self only health care insurance plan with a minimum deductible of $1200 or higher, or any family health insurance plan with a minimum deductible higher than $2400 is a qualified high deductible health plan, to be eligible to open an HSA.

Opting for HDHP - Pros and Cons

One of the obvious pros of opting for an HDHP is the eligibility it provides you with for a health savings account. It lets you save money in a bank account, with no taxes charged, as long as the money is used to pay for medical expenses.

Another advantage of having a this plan is the low cost of insurance premiums. The obvious disadvantage is the high deductible amount, which means that you have to pay more out of your pocket. If you or your family have had persistent health problems, a HDHP may not be able to provide adequate coverage.

One of the main advantages of opting for a HDHP is the eligibility it provides you with to open a health savings account. Other than that, it brings the insurance premiums down to an affordable level. Check out your health status and that of your family members, make an estimate of your yearly medical expenses, and depending on your budget, evaluate whether such a plan is the right choice for you.