What is a High-Deductible Health Plan (HDHP) and its relationship to HSAs?

What is a High-Deductible Health Plan (HDHP) and its relationship to HSAs?

• A. An HDHP has a low deductible and cannot contribute to an HSA
• B. An HDHP is unrelated to HSAs
• C. An HDHP is the only plan that can offer employer HSA contributions
• D. An HDHP features a high deductible; it is a qualifying plan for contributing to an HSA

Answer: (D)

An HDHP is a health plan with a higher deductible and higher out-of-pocket limits, and it is the plan type that qualifies you to contribute to a Health Savings Account. Because the plan meets the IRS criteria for HDHPs, you can open and fund an HSA—contributions can come from you or your employer—and those funds grow tax-free and can be used tax-free for qualified medical expenses. The money stays with you and rolls over year to year, even if you change jobs or health plans. The other statements misstate the relationship: a low-deductible plan isn’t eligible for HSA contributions, HSAs aren’t unrelated to HDHPs, and employer contributions aren’t exclusive to any other plan type. The essential point is that the HDHP’s high deductible makes it eligible for an HSA.

An HDHP is a health plan with a higher deductible and higher out-of-pocket limits, and it is the plan type that qualifies you to contribute to a Health Savings Account. Because the plan meets the IRS criteria for HDHPs, you can open and fund an HSA—contributions can come from you or your employer—and those funds grow tax-free and can be used tax-free for qualified medical expenses. The money stays with you and rolls over year to year, even if you change jobs or health plans. The other statements misstate the relationship: a low-deductible plan isn’t eligible for HSA contributions, HSAs aren’t unrelated to HDHPs, and employer contributions aren’t exclusive to any other plan type. The essential point is that the HDHP’s high deductible makes it eligible for an HSA.