What defines a High-Deductible Health Plan (HDHP) and what is the purpose of a Health Savings Account (HSA) paired with it?

• A. HDHPs have a higher deductible and higher premiums; paired with an HSA, funds are contributed after tax and can be used for any expense.
• B. HDHP has a higher deductible and lower premiums; paired with an HSA, funds are contributed pre-tax, grow tax-free, and can be used tax-free for eligible medical expenses; unused funds carry over year to year.
• C. HDHPs have no deductible and lower out-of-pocket costs.
• D. HDHPs are only for catastrophic coverage with no preventive care.

Answer: (B)

High-Deductible Health Plans are designed so you pay more out of pocket before the plan pays, but you save on monthly premiums. The Health Savings Account paired with an HDHP provides a triple tax advantage: contributions are made pre-tax (or are tax-deductible), the money grows tax-free, and withdrawals used for eligible medical expenses are tax-free. Any unused funds roll over year to year, so the account can build into a long-term medical fund. This combination is best described by saying the plan has a higher deductible and lower premiums, with an HSA that offers pre-tax contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses, plus year-to-year rollover.

The other descriptions don’t fit: a plan that claims no deductible and lower out-of-pocket costs isn’t accurate for HDHPs; HSAs aren’t funded after tax in the sense of losing tax benefits, and funds aren’t usable for any expense without penalties—only qualified medical expenses are eligible; and HDHPs are not restricted to catastrophic coverage—preventive services are often covered without affecting the deductible, depending on the plan and regulations.