The percentage of workers covered under HDHP plans has increased from four percent of all employer-sponsored health insurance plans in 2006 to 31 percent in 2020. A high deductible health plan (HDHP) paired with a Health Savings Account (HSA) is growing in popularity because it allows employees to pay for medical expenses tax-free.
When combined with a Health Reimbursement Arrangement (HRA), an HSA with an HDHP can be a powerful health benefit that sets you apart. It provides employees with a safety need for crisis, gives them a way to save for the future, while enabling employers to show they care by reimbursing employees for premiums, preventive medical treatment and dental/vision.
HSA High Deductible Health Plan (HDHP) - The Basics
High-deductible health plans (HDHPs) provide insurance coverage.
An HDHP has:
- A higher annual deductible than a traditional group health insurance plan
- A maximum limit on the sum of the annual deductible and out-of-pocket medical expenses that an enrollee might pay for covered expenses. Out-of-pocket expenses include co-payments and other amounts, but do not include premiums.
An HDHP may (but doesn’t always) cover preventive care benefits before the deductible is met. Preventive care includes, but is not limited to, the following:
- Periodic health evaluations, including tests and diagnostic procedures ordered in connection with routine examinations, such as annual physicals
- Routine prenatal and well-child care
- Child and adult immunizations
- Tobacco cessation programs
- Obesity weight-loss programs
- Screening services (e.g., cancer, heart, mental health, pediatric, vision)
HSA High Deductible Health Plan (HDHP) - 2021 Guidelines
To be considered an HDHP (and to qualify for opening an HSA), the HDHP must meet the following minimum annual deductible and maximum annual deductible and other out-of-pocket expenses for HDHPs for 2021.
|HDHP minimum deductibles||$1,400||$2,800|
|HDHP maximum out-of-pocket amounts (deductibles, co-payments and other amounts, but not premiums)||$7,000||$14,000|
* This limit does not apply to deductibles and expenses for out-of-network services if the plan uses a network of providers. Instead, only deductibles and out-of-pocket expenses for services within the network should be used to figure whether the limit applies.
Self-only HDHP coverage is an HDHP covering only an eligible individual. Family HDHP coverage is an HDHP covering an eligible individual and at least one other individual (whether or not that individual is an eligible individual).
Interested in offering an HSA alongside an HDHP? Take our quiz to see if a group coverage HRA could be right for your organization.
HDHPs are a great way for employers to save money on premiums while providing a safety net to employees. However, employees won’t really see the value in them unless they have a medical emergency. Adding an HSA is a great way to provide additional help should such an emergency occur, but employers must be careful to select an HSA-qualified HDHP. Adding an HRA along with the HSA, allows you to reimburse employees premiums, preventive treatments, and dental and vision costs, so they can save their HSA funds for a time they might truly need them.
Click here to read IRS Guidelines, Rev. Proc. 2020-32.
This post was originally published in September 2013. It was last updated October 26, 2020.