High Deductible Health Plan (HDHP) (HDHP)

A plan that features higher deductibles than traditional insurance plans. High deductible health plans (HDHPs) can be combined with a health savings account or a health reimbursement arrangement to allow you to pay for qualified out-of-pocket medical expenses on a pre-tax basis.

A type of health insurance plan that, compared to traditional health insurance plans, requires greater out-of-pocket spending, although premiums may be lower. In 2010, an HSA-qualifying HDHP must have a deductible of at least $1,200 for single coverage and $2,400 for family coverage. The plan must also limit the total amount of out-of-pocket cost-sharing for covered benefits each year to $5,950 for single coverage and $11,900 for families.

A high deductible health plan (HDHP) requires substantially higher than average out-of-pocket expenses before the insurance company will start paying for your medical expenses.

However, the premiums for an HDHP are generally lower than the premiums for traditional fee-for-service, participating provider organization (PPO), or a health maintenance organization (HMO) plan.

The HDHP may also pay a larger percentage of your expenses once you have satisfied the deductible. If you have an HDHP, you may be eligible for a health savings account (HSA), which allows you to make tax-free withdrawals to pay for medical care that's not covered by your plan.

Money you put in an HSA or that an employer contributes to your account and that you don't spend for qualified expenses can be rolled over and used in later years.