Definition
A health plan that trades a lower monthly premium for a deductible above IRS-defined minimums, meaning you pay more out of pocket before coverage kicks in. It is the only plan type that allows contributions to a health savings account (HSA).
Why it matters
The HDHP question is cash flow versus insurance: cheap months and expensive emergencies. For people who can fund the deductible from savings, the premium savings plus the HSA's triple tax break often win; for those who cannot, the deductible is a debt waiting to happen.
Example
A family compares a $450-a-month traditional plan with a $280 HDHP. They take the HDHP, route the $170 monthly difference into an HSA, and after a year hold about $2,000 there, enough to cover most of the deductible if a bad year arrives, pre-tax either way.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.