IRS takes shot at rising inflation with 2023 HSA limits

Amid soaring inflation, annual health savings account contribution limits for 2023 are increasing in one of the biggest jumps in recent years.

The Internal Revenue Service announced Friday that for the calendar year 2023, the health savings account contribution limits for an individual with self-only coverage will jump to $3,850—a significant $200 increase from $3,650 for this year. Last year, the amount climbed just $50 from $3,600 for 2021. For family coverage, the HSA contribution limit jumps to $7,750 next year from $7,300 in 2022.

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Meanwhile, for 2023, the health plan must have a deductible of at least $1,500 for self-only coverage, up from $1,400 in 2022, or $3,000 for family coverage, up from $2,800.

Out-of-pocket maximums also are increasing significantly. For 2023 individual coverage, those will increase to $7,500 from $7,050 and to $15,000 from $14,100 for family coverage for 2023.

The significant jump in contribution limits is “a strong validation that the IRS is looking at the real world ramifications of inflation and the cost pressures that we’re seeing across the market,” says Kevin Robertson, chief revenue officer at HSA Bank. “For people who are strong spenders or utilizers of healthcare, this is a welcome addition.”

Even so, the 5.5% increase for HSA limits is much lower than the current inflation rate, which is 8.5%, according to the latest consumer price index. With those big cost-of-living increases impacting employees in all facets of life, employers are—and should be—thinking about how they can help, experts say. Encouraging employees to up their HSA contributions can be a helpful tactic to assist with medical costs. Employers often promote HSAs and encourage workers to increase their contributions during open enrollment, though HR and benefits leaders can start that conversation now.

Related: Time for employers to act as healthcare costs skyrocket

“This is actually good news—finally—to communicate. It gives a platform for which the employer can talk about [HSAs] or anything else related to employee benefits and engagement,” Robertson says, adding that employers should communicate about the HSA limit change both now and during open enrollment. “The reason is because repetition matters. When you say something to somebody, they’re not necessarily going to change their course of action by hearing something once. But it’s the repetition that helps reinforce those messages.”

Plus, if allowed by their employer, employees can change their health savings account contribution levels during any point in the plan year, so workers who aren’t taking advantage of the current 2022 limits may be inclined to do so after employer communication.

Many industry insiders tout health savings accounts as a smart way for employees to save for medical expenses (even in retirement), citing their triple tax benefits. HSA enrollment continues to grow, and more employers also are offering contributions to employees’ accounts. At the end of January, Americans held $100 billion in 33 million health savings accounts, according to HSA advisory firm Devenir.

The IRS increases are detailed in IRS Revenue Procedure 2022-24 and take effect in January.

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Kathryn Mayer
Kathryn Mayer is HRE’s former benefits editor and chair of the Health & Benefits Leadership Conference. She has covered benefits for the better part of a decade, and her stories have won multiple awards, including a Jesse H. Neal Award and honors from the American Society of Business Publication Editors and the National Federation of Press Women. She holds bachelor’s and master’s degrees from the University of Denver.