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What is a high deductible health plan (HDHP)?
by Kaiser Permanente | October 2, 2025
Are you trying to choose a health insurance plan? High deductible health plans, or HDHPs, might be an option. They’ve become more popular because the monthly premiums can cost much less than other plans. And some have tax advantages. But before you sign up for an HDHP, you’ll want to make sure it meets your budget and your health care needs. In this article, you’ll learn:
- What an HDHP is and how it works
- How it works with a health savings account (HSA)
- How much you’ll pay
- The pros and cons of high deductible health plans
- If an HDHP makes sense for you
- How they differ from other plan types
What is a high deductible health plan?
True to its name, an HDHP is a plan with a higher deductible than other types of health insurance plans. That deductible is a set amount you need to pay out of your own pocket each year before your insurance pays for anything. Because of this, plans with a high deductible usually have a lower monthly cost, also called a rate or premium.
How does an HDHP work?
An HDHP works like other health plans in terms of what it covers, but how you pay for care is different. Before you reach your deductible, you pay the full cost of all your care. After you reach the deductible, your insurance starts paying for the services included in your coverage — but you may still have to pay part of the cost. This could be a copay (a set amount, like $20 for a doctor visit), coinsurance (a percentage of the cost of care), or both. When your plan renews for another year, your deductible resets, and you’ll pay the full cost of care again until you reach it.
To limit how much you pay for care, HDHPs also have an out-of-pocket maximum. Once you spend that amount in a given year — including payments toward your deductible, copays, and coinsurance — your insurance will pay 100% of the cost for covered in-network care until your plan renews for another year.
Your plan documents list your yearly deductible and out-of-pocket maximum.
If your HDHP meets federal government guidelines, you can also open an HSA to help pay your medical costs.
What is a health savings account?
An HSA is a personal savings account that lets you set aside pretax money to pay for certain medical expenses. These include dental care, eye exams, and prescription drugs, as well as copays and coinsurance. To open an HSA, you need to be enrolled in a qualifying HDHP.
Benefits of an HSA
- Some employers will contribute to your HSA
- Money added to your HSA isn’t considered part of your wages, so you don’t pay taxes on it
- If you leave your job, you take your HSA with you
- Money you don’t use stays in your account — you don’t lose it at the end of the year
Limits of an HSA
- You can’t use an HSA to pay your HDHP premiums
- The federal government sets a limit on how much money you can add each year
Some employers offer flexible spending accounts (FSAs) instead. FSAs are like HSAs, but you usually can’t have both at the same time. With an FSA, you have to spend the money in your account by the end of the year or you lose it. And if you leave your job, the FSA money doesn’t go with you.
How much will I pay with an HDHP?
With an HDHP, you’ll pay a monthly fee, called a premium. This doesn’t count toward your deductible or out-of-pocket maximum.
If you need health care, you’ll pay the full cost yourself until you reach your deductible. After that, you’ll usually just pay a copay or coinsurance until you reach your plan’s out-of-pocket maximum. Once you reach that maximum, your plan will pay 100% of the cost for covered in-network care for the rest of the year.
For example:
- If your monthly premium is $100, you’ll pay $1,200 for the year. This amount doesn’t count toward your deductible or out-of-pocket maximum.
- If your deductible each year is $3,000, you’ll pay for most covered care until you’ve spent $3,000. Costs for care that isn’t medically necessary, like cosmetic surgery, usually won’t count toward your deductible.
- Your yearly deductible payments do count toward your out-of-pocket maximum. If your maximum is $6,000, and you pay $3,000 toward your deductible and another $3,000 in copays and coinsurance, you’ll reach your maximum. After that, your plan will pay 100% of covered in-network care costs for the rest of the year.
What are the pros and cons of a high deductible health plan?
HDHPs can save you money each month because they have low premiums. Many plans also cover in-network preventive services, like physicals and vaccinations, before you meet your deductible. If you’re healthy and mostly need preventive care, an HDHP might be a good fit. If you need a higher level of care, an HDHP still gives you access to both primary and specialty care, local medical facilities, lab services, and prescription drugs. You may also be able to open an HSA to help pay for medical costs with tax-free money.
These plans also have downsides. You pay the full cost of most care until you reach your deductible, which can be high. If you need unexpected, expensive care early in the year, you could get stuck with a big surprise bill while also dealing with a major health issue. To avoid those out-of-pocket costs, about 1 in 3 U.S. adults skip or wait to get care they need.* This can make health problems worse and cost more down the road.
Pros
- Low monthly premiums
- Preventive services often covered at 100% before deductible
- Access to quality medical care if you need it
- Similar benefits to other plans once the deductible is met
- Some plans let you open a pretax health savings account
Cons
- You pay all costs for most care until you’ve paid the high deductible
- You might get a big, unexpected bill if you need care early in the year
- Worries about money might make you wait or skip going to the doctor
When might an HDHP not be a good choice?
In some situations, a plan with a lower deductible and higher premiums is a better choice. Consider a PPO or HMO if:
- You have a family with young children
- You’re planning to have a baby soon
- You have an ongoing condition that needs regular treatment
- Your prescription medications are expensive, or you take more than one
- You or your children engage in high-risk sports or hobbies
- You couldn’t afford to pay the full deductible if you had a medical emergency early in the year
How do HDHPs, PPOs, and HMOs compare?
| HDHP | Preferred provider organization (PPO) | HMO | |
| Monthly cost | Low premiums | Higher premiums | Generally low premiums |
| Deductible | High — you pay more out of pocket before insurance helps | Moderate to high, depending on the plan | Usually low or none |
| Coverage | You pay full price for care until you meet your deductible, then you’ll pay coinsurance or copays until you reach your out-of-pocket maximum | You can see any doctor, including out of network, without a referral | You must use doctors in the HMO network, and you usually need a referral to see a specialist |
| Flexibility | Can be paired with an HSA to save money tax-free for medical costs | You have a wide choice of providers | Less flexible — you must choose a primary care doctor to manage your care |
| Best for | People who are generally healthy and want to save on monthly costs | People who want the freedom to choose doctors and specialists without referrals | People who want coordinated care and lower costs and don’t mind staying in network |
How to shop for a high deductible health plan
There’s a lot to consider when choosing health insurance. An HDHP can save you money but it depends on the plan and your medical expenses. When looking at HDHPs, don’t just focus on monthly cost. Make sure to compare the coverage options of available HDHPs. Look at the provider networks, out-of-pocket costs, and out-of-pocket maximums.
If your employer doesn’t offer an HDHP, or you don’t have employer coverage, you can shop for an HDHP at HealthCare.gov. Many state-run health insurance exchanges also have HDHP options.
Learn more about affordable health insurance
Learn how a flexible spending account (FSA) or health savings account (HSA) can help cover out-of-pocket medical expenses.
Learn how to plan for routine health care costs and prepare for the unexpected.
Learn more about Kaiser Permanente
Footnotes
*Grace Sparks et al., “Americans’ Challenges With Health Care Costs,” KFF, July 11, 2025.