IRS Definition of an HDHP: Current Year Thresholds

The IRS sets binding numerical thresholds that determine whether a health plan qualifies as a High-Deductible Health Plan (HDHP) under the Internal Revenue Code. These thresholds govern eligibility for Health Savings Accounts (HSAs) and are adjusted annually for inflation under Revenue Procedures published each spring. Understanding the precise IRS criteria — minimum deductibles, maximum out-of-pocket limits, and the rules that apply to self-only versus family coverage — is essential for employers designing plans, employees choosing coverage, and administrators ensuring compliance.

Definition and scope

Under 26 U.S.C. § 223(c)(2), an HDHP is defined as a health plan that satisfies two simultaneous conditions: a minimum annual deductible that meets the IRS floor, and an annual out-of-pocket maximum that does not exceed the IRS ceiling. A plan that satisfies only one of the two conditions does not qualify as an HDHP for HSA-eligibility purposes.

The IRS publishes updated thresholds each year in a Revenue Procedure. For 2024, IRS Revenue Procedure 2023-23 established the following qualifying thresholds:

1. Self-only coverage — minimum deductible of $1,600; out-of-pocket maximum of $8,050
2. Family coverage — minimum deductible of $3,200; out-of-pocket maximum of $16,100

For 2025, IRS Revenue Procedure 2024-25 set the thresholds at:

1. Self-only coverage — minimum deductible of $1,650; out-of-pocket maximum of $8,300
2. Family coverage — minimum deductible of $3,300; out-of-pocket maximum of $16,600

The scope of these definitions applies specifically to HSA-qualifying HDHPs under IRC § 223. Plans marketed as "high-deductible" for other purposes — such as ACA cost-sharing tiers — use separate, non-equivalent criteria and may not satisfy the IRC § 223 test. A full overview of how these rules interconnect with plan design is available at HDHP Authority.

How it works

The IRS threshold structure operates as a two-sided gate. A plan must clear the minimum deductible floor and stay beneath the out-of-pocket maximum ceiling simultaneously.

Minimum deductible: The deductible must apply to all covered services — with a limited statutory exception for preventive care, which may be covered at no cost before the deductible is met under IRC § 223(c)(2)(C). Notably, telehealth services received a temporary first-dollar coverage exception through various legislative extensions; see HDHP telehealth coverage and first-dollar benefits for current status.

Out-of-pocket maximum: This cap limits the total annual cost-sharing (deductibles, copayments, and coinsurance) a plan member can owe. The HDHP out-of-pocket ceiling is distinct from — and in most years lower than — the ACA's separate out-of-pocket maximum under 45 CFR § 156.130.

Family coverage — the embedded deductible problem: For family-tier HDHPs, the IRS requires that no individual within the family coverage tier have their benefits triggered before the full family deductible is satisfied, unless the plan uses an embedded individual deductible that itself meets the minimum HDHP floor. A plan with a $3,300 family deductible but an embedded individual deductible of $1,000 — below the $1,650 self-only floor for 2025 — disqualifies all covered family members from HSA eligibility. This is one of the most common compliance failures in employer-sponsored HDHP plan design.

Common scenarios

Scenario 1 — Employer plan with an embedded deductible at the floor: An employer offers a family plan with a $3,300 family deductible and an embedded individual deductible of $1,650 for 2025. Because the embedded individual deductible equals the IRS self-only minimum, the plan qualifies. Each covered family member may contribute to an HSA.

Scenario 2 — Plan deductible below the minimum: A plan offers a $1,200 individual deductible for 2025. Because $1,200 falls below the $1,650 minimum, the plan fails the HDHP test. Members cannot open or contribute to an HSA, even if the out-of-pocket maximum is well within the ceiling.

Scenario 3 — Out-of-pocket maximum exceeds the ceiling: A plan sets a $1,650 individual deductible (meeting the floor) but an out-of-pocket maximum of $9,500 for self-only 2025 coverage. Because $9,500 exceeds the $8,300 ceiling, the plan is disqualified. Both conditions must be met together.

Scenario 4 — Mid-year plan change: An employee enrolled in a qualifying HDHP in January loses HDHP-qualifying status in July because the employer switches to a plan with a sub-floor deductible. Under IRS Publication 969, HSA contributions must be prorated to the months of qualifying coverage, subject to the last-month rule exception with a 13-month testing period.

Decision boundaries

The following structured comparison illustrates the boundary conditions between a qualifying and non-qualifying plan:

Administrators reviewing plan documents should cross-reference the Summary Plan Description deductible language against both the self-only and family thresholds simultaneously. A plan that qualifies for self-only enrollees may still disqualify family enrollees if embedded deductible provisions fall below the self-only floor.

For employers comparing HDHP options against PPO or HMO structures on these cost dimensions, see HDHP vs PPO: Key Differences and understanding HDHP deductibles. The interaction between HDHP qualification and HSA contribution limits — which are also adjusted annually — is covered in detail at HSA contribution limits and annual IRS HDHP and HSA threshold updates.

References

• 26 U.S.C. § 223 — Internal Revenue Code, Health Savings Accounts
• IRS Revenue Procedure 2023-23 — 2024 HDHP and HSA Thresholds
• IRS Revenue Procedure 2024-25 — 2025 HDHP and HSA Thresholds
• IRS Publication 969 — Health Savings Accounts and Other Tax-Favored Health Plans
• 45 CFR § 156.130 — ACA Cost-Sharing Limits, Electronic Code of Federal Regulations

The law belongs to the people. Georgia v. Public.Resource.Org, 590 U.S. (2020)