Healthcare Terminology and Education
High Deductible Health Plans (HDHPs)
What is a High-Deductible Health Plan (HDHP)?
A HDHP is a health insurance policy featuring lower monthly premiums paired with higher annual deductibles that you must pay before coverage begins. These plans typically qualify individuals to open, contribute to, and maintain a Health Savings Account (HSA).
2027 HDHP Requirements
For a plan to qualify as an HDHP and allow Health Savings Account (HSA) contributions, it must meet the following limits:
Minimum Deductibles
The minimum deductible is the amount an employee must pay out of pocket each year before the health plan begins to share in the cost of care.
-
Self-only coverage: $1,750 (+$50 from 2026)
-
Family coverage: $3,500 (+$100 from 2026)
Maximum Out-of-Pocket Costs
The out-of-pocket maximum is the most an employee will pay for covered in-network care during the year.
-
Self-only coverage: $8,700 (+$200 from 2026)
-
Family coverage: $17,400 (+$400 from 2026)
Once the deductible is met during the year, the plan begins sharing costs with the employee through copays and coinsurance. Copays are set dollar amounts for services like doctor visits or prescriptions. Coinsurance is a percentage of the cost of a covered service that the employee pays, such as paying 20 percent while the plan pays the remaining 80 percent. Both copays and coinsurance count toward the out-of-pocket maximum. Once the out-of-pocket maximum is reached, the plan covers 100 percent of eligible in-network services for the remainder of the year.
Health Savings Accounts (HSAs)
What is a Health Savings Account (HSA)?
An HSA is a tax-advantaged savings account paired exclusively with a High-Deductible Health Plan (HDHP). Funds deposited into an HSA are 100% tax-free when contributed, grow tax-free, and remain tax-free when spent on qualified medical expenses (such as doctor visits, prescriptions, dental, and vision care).
Funding Options
Employer Contributions: The employer may directly contribute funds (“seed money”) into your account to assist with meeting your deductible.
Employee Pre-Tax Payroll Deductions: You can contribute funds directly from your paycheck on a pre-tax basis, lowering your overall taxable income.
Direct Contributions: You can also contribute post-tax dollars directly to your account and claim a tax deduction when filing your personal income tax return.
Annual IRS Contribution Limits (2027)
The IRS establishes maximum combined annual contribution limits (employer + employee combined).
-
Self-Only Coverage: Up to $4.500 per year.
-
Family Coverage: Up to $9,000 per year.
-
Catch-Up Contributions: Individuals aged 55 and older can contribute an additional $1,000 per year.
Account Ownership & Portability
-
It Belongs to You: Unlike a Flexible Spending Account (FSA), HSA funds are 100% owned by the employee from day one.
-
No “Use-It-or-Lose-It”: Unused funds automatically roll over from year to year indefinitely – there is no deadline to spend them.
-
Portability: If you change jobs, retire, or leave the health plan, the HSA and all funds inside it remains yours for life.
Medicare Restrictions & Rules
-
Contribution Eligibility: Once you enroll in any part of Medicare (Part A, B, C, or D), you are no longer eligible to make new contributions to an HSA (or receive employer contributions).
-
Using Existing Balances: If you have an existing HSA balance prior to Medicare enrollment, you can continue to use those funds tax-free for qualified medical expenses indefinitely, including paying for Medicare Part B, Part D, and Medicare Advantage premiums. You cannot use HSA funds tax-free to pay for Medicare Supplement (Medigap) insurance premiums.
Learn more about Health Savings Accounts (HSAs) to decide if it would be a good fit for you and your family.
HSA Contribution Limits