The IRS definition of a high-deductible health plan

A high-deductible health plan (HDHP) is a health insurance plan that meets specific deductible and out-of-pocket limits set by the IRS each year. For 2023, an HDHP must have a deductible of at least $1,500 for individual coverage or $3,000 for family coverage. The plan's total out-of-pocket maximum (the most you pay before insurance covers everything) cannot exceed $7,500 for individual coverage or $15,000 for family coverage.

These numbers change annually. The IRS adjusts them for inflation, so the 2024 limits are different from 2023. Your insurance company will tell you whether your plan meets the HDHP definition for the year you're enrolled. The key point: if your deductible is lower than the IRS minimum, your plan is not an HDHP, even if it feels like you're paying a lot out of pocket.

The reason these limits matter is that only people enrolled in an HDHP can open and contribute to a Health Savings Account (HSA). If your plan doesn't meet the IRS thresholds, you cannot use an HSA, even if your employer offers one.

Key Takeaways

  • For 2023, an HDHP must have a deductible of at least $1,500 (individual) or $3,000 (family) and an out-of-pocket maximum of no more than $7,500 (individual) or $15,000 (family).
  • Your insurance company determines whether your specific plan meets the HDHP definition; you cannot self-declare a plan as high-deductible.
  • Only people enrolled in an HDHP can open an HSA or contribute to one during that year.
  • The IRS adjusts HDHP limits every year, so a plan that may have access to in 2023 may not may have access to in 2024 if limits change and your plan's deductible stays the same.

How to confirm your plan is an HDHP

Check your insurance documents — your Summary of Benefits and Coverage (SBC) or your plan's official description. Look for the deductible amount and the out-of-pocket maximum. If both numbers fall within the IRS ranges for your coverage type (individual or family), your plan is an HDHP.

You can also call your insurance company's customer service line and ask directly: "Does my plan meet the IRS definition of a high-deductible health plan for 2023?" They will give you a yes or no answer. If yes, ask them to confirm the deductible and out-of-pocket maximum in writing, because you'll need those numbers if you open an HSA.

If you get your insurance through an employer, your benefits administrator or HR department can also confirm this. Many employers label HDHP plans clearly in their benefits materials, but do not assume — verify the actual numbers.

Plans that do not count as HDHPs

A plan with a $1,200 deductible does not may have access to, even if the out-of-pocket maximum is low. A plan with a $2,000 deductible for individual coverage does not may have access to. A plan with a $3,500 deductible for family coverage does not may have access to. The deductible must meet or exceed the IRS minimum for your coverage type.

Some plans marketed as "high-deductible" by insurers or employers may not meet the IRS definition. Marketing language and legal definition are not the same thing. The only definition that matters for HSA purposes is the one the IRS publishes each year.

Certain types of coverage also disqualify a plan from being an HDHP. If you have coverage through Medicare, TRICARE, the Veterans Administration, or certain other government programs, you cannot use an HDHP or HSA. If you are claimed as a dependent on someone else's tax return, you also cannot open an HSA, regardless of your plan type.

What happens if your plan stops being an HDHP

If your employer changes your plan mid-year and the new plan no longer meets the HDHP definition, you can no longer contribute to your HSA for that year. However, money already in your HSA stays there and continues to grow tax-free. You can still withdraw from it to pay for medical expenses, even though you're no longer in an HDHP.

If you switch to a non-HDHP plan during open enrollment for the next year, you can continue to use your HSA for medical expenses in retirement or later. The account does not disappear. You simply cannot add new money to it while you're not enrolled in an HDHP.

HDHP deductibles and how they work with HSAs

The deductible is the amount you pay out of your own pocket before your insurance plan starts paying for covered services. With an HDHP, this deductible is higher than with traditional plans, which is why the premiums (monthly payments) are usually lower. The trade-off is that you pay more upfront when you need care.

An HSA lets you set aside pre-tax money to pay that deductible and other medical costs. Because the money goes in before taxes and comes out tax-free for medical expenses, you save money on taxes while you're meeting your deductible. This is the main financial advantage of pairing an HDHP with an HSA.

Some HDHPs cover preventive care (like annual checkups and vaccines) before you meet your deductible. This is allowed under federal law and does not change whether the plan qualifies as an HDHP. Check your plan documents to see what preventive services are covered at no cost to you.

Frequently Asked Questions

Can I have an HDHP and an HSA if I'm on Medicare?

No. Once you enroll in Medicare, you cannot open a new HSA or contribute to an existing one. If you already have an HSA before Medicare, you can keep the money in it and withdraw it for medical expenses, but you cannot add new contributions. This applies even if your Medicare plan has a high deductible.

What if my employer's plan has a $1,500 deductible but high out-of-pocket costs?

If the deductible is $1,500 or more and the out-of-pocket maximum does not exceed $7,500 (for individual coverage), the plan still qualifies as an HDHP. The out-of-pocket maximum is what matters for the upper limit. Check both numbers on your plan documents.

Do I have to use an HSA if I'm in an HDHP?

No. You can be enrolled in an HDHP without opening an HSA. However, you cannot open an HSA unless you are in an HDHP. If you want an HSA, you must first be in a plan that meets the IRS definition.

Will my HDHP still may have access to in 2024?

Possibly not. The IRS raises the minimum deductible and out-of-pocket limits most years. If your plan's deductible stays the same but the IRS minimum increases, your plan may no longer may have access to. Check the 2024 limits when they are released and confirm with your insurance company whether your plan still meets the definition.