How does a high-deductible health plan (HDHP) work with an HSA?

A high-deductible health plan (HDHP) is specifically designed to work in conjunction with a Health Savings Account (HSA). The key aspect of this relationship is that HDHPs have higher deductibles than traditional insurance plans, which means that they typically have lower monthly premiums and may leave more out-of-pocket expenses for the insured until the deductible is met.

The correct response indicates that an HDHP allows for higher contributions to an HSA because individuals who are enrolled in an HDHP can contribute to an HSA up to certain limits set by the IRS. These contribution limits can be higher compared to those for other types of health plans, providing individuals with the ability to save more pre-tax dollars for medical expenses. HSAs are particularly beneficial in this context because they encourage saving for future medical costs, often without the complications of other savings and investment options.

In contrast, the other options present misunderstandings about the nature of HDHPs and HSAs. For instance, HDHPs are not solely defined by low premiums, nor do they prevent individuals from contributing to an HSA. Furthermore, HSA funds can be used for a wide range of qualifying medical expenses, not just preventive care, making it a flexible tool in managing healthcare costs