High-deductible health plan (HDHP) and health savings account (HSA) basics
It seems there's one thing that almost everyone can agree on when it comes to health insurance. It can be extremely confusing! One thing that adds to that confusion is all of the health insurance jargon that's used throughout the industry. CDHC, HDHP, HSA, FSA — what do all of these letters even mean? Let's boil it down.
What is consumer-driven health care (CDHC)?
Consumer-driven health care is the overarching concept of health insurance plans and programs — like high-deductible health plans and health savings accounts — that put you in control of your health care and finances. It's a great way to get engaged in your own health, as well as the financial aspects of health care. Plus, it may even help you save on health care costs through proactive budgeting and planning for future services you may need.
What is a high-deductible health plan (HDHP)?
A high-deductible health plan is a health insurance plan that typically offers lower monthly premiums in exchange for higher deductibles and out-of-pocket costs.
A deductible is the amount of money you must pay before the health plan pays. In an HDHP, you are responsible for 100 percent of the cost of health care before meeting the deductible. However, preventive services are typically covered at no cost to you even if you haven't reached your deductible yet. Just make sure to use an in-network provider.
HDHPs also have an annual out-of-pocket maximum, which is the most you'll have to pay out-of-pocket for the year, not including monthly premiums.
With an HDHP, you're responsible for more out-of-pocket costs. But, you can pair an HDHP with a health savings account (HSA) to help you pay for qualified medical expenses.
What is a health savings account (HSA)?
A health savings account is used to set aside pre-tax money and then withdraw funds to pay for eligible out-of-pocket medical, dental and vision expenses.
You can decide how much you want to contribute annually, as long as it equals or is less than the contribution limit the IRS sets for HSAs each year. If money is still in your account at the end of your plan year, it will automatically carry over. It's like a 401K for health care. Any balance in an HSA stays with you, regardless of changes in employment, insurance carrier or retirement.
What is a flexible spending account (FSA)?
Flexible spending accounts are also used to pay for eligible medical, dental and vision expenses that aren't covered by insurance. But, they're typically available through your employer and funds don't roll over to the next year.
Each year, you can determine how much you want to contribute to your FSA. This money is available on day one of the plan year and is automatically deducted pre-tax. Similar to HSAs, the IRS sets limits on how much employees can contribute to their FSA.
Want to learn more?
Blue is here to help you better understand health insurance. Check out our Plan Smart section to get the most from your benefits.
You can also get more from your health plan by logging in or registering for myWellmark® Opens new window. Check claims details, view health care spending, find an in-network doctor, use tools to understand your benefits and more. It's all available with myWellmark, your one-stop-source for personalized health care information.
