What characterizes a High Deductible Health Plan (HDHP)?

A High Deductible Health Plan (HDHP) is characterized by having a specified minimum deductible amount that must be met before the insurance starts to pay for most services. Additionally, there is a cap on out-of-pocket expenses, which limits the total amount an insured person would have to spend in a year, including deductibles, copayments, and coinsurance. This structure is designed to encourage individuals to consider their healthcare spending more carefully, as they will need to incur more costs upfront before their insurance benefits kick in.

The criteria for what constitutes an HDHP, as set by the IRS, typically includes a minimum deductible that must be reached and a maximum limit on annual out-of-pocket expenses, making this option accurate. Other potential characteristics of HDHPs can include lower premiums compared to traditional plans, but the key defining feature relates to the deductible and out-of-pocket limit.