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March 26, 2021

High deductible health plan (HDHP)

Your Guide

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Definition

A high deductible health plan (HDHP) is a health plan that has an annual deductible which is not less than a certain amount for self-coverage and family coverage. The amount for family coverage is usually twice the dollar amount that applies for self-coverage.

The sum of the annual deductible and other annual out-of-pocket expenses required to be paid under the plan (other than for premiums) for covered benefits does not exceed a certain amount. Again, the amount for family coverage is usually twice the dollar amount that applies for self-coverage. For instance, the current limits are :

  • For calendar year 2020, the annual deductible is not less than $2,350 for self-only coverage or $4,750 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $4,750 for self-only coverage or $8,650 for family coverage.
  • For calendar year 2021, the annual deductible is not less than $2,400 for self-only coverage or $4,800 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $4,800 for self-only coverage or $8,750 for family coverage

Referring Cite

IRC § 223(c)(2)(A).

Additional Helpful Information

Exclusion of certain plans

  • An HDHP does not include a plan if substantially all of the coverage is for accidents, disability, dental care, vision care, or long-term care.
  • An HDHP also cannot be insurance that you are permitted to have in addition to an HDHP.

Safe harbor for absence of preventive care deductible

  • A plan shall not fail to be treated as a high deductible health plan by reason of failing to have a deductible for preventive care (within the meaning of section 1871 of the Social Security Act, except as otherwise provided by the Secretary).

Special rules for network plans

In the case of a plan using a network of providers—

    • Annual out-of-pocket limitation: Such plan shall not fail to be treated as a high deductible health plan by reason of having an out-of-pocket limitation for services provided outside of such network which exceeds the applicable limitation in effect for the year
    • Annual deductible: Such plan’s annual deductible for services provided outside of such network shall not be taken into account for purposes of the monthly limitation in effect

Written By

Denise Appleby

Denise is CEO of Appleby Retirement Consulting Inc., a firm that provides IRA resources for financial/ tax/legal professionals. She has over 20 years of experience in the retirement plans field, which includes training and technical consultation.

Denise writes and publishes educational /marketing tools for advisors; available at http://irapublications.com. Denise co-authored several books on IRAs

Denise is a graduate of The John Marshall Law School, where she obtained a Masters of Jurisprudence in Employee Benefits, and has earned 5 professional retirement designations.
She has appeared on numerous media programs, sharing her insights on retirement tax laws.

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