I have a family HDHP with an HSA that covers myself and my children. My wife has her own HDHP with no HSA. Why does TurboTax say her coverage has lapsed?

Because your spouse did not go through the HSA interview in TurboTax (since she did not have an HSA), TurboTax was never told about her HDHP coverage. In an effort to find out if your spouse used the last-month rule in 2022, TurboTax asked you what type of High Deductible Health Plan (HDHP) she had on December 31, 2022 (remember that odd question?).

When you answered either Family or Self, TurboTax then made the assumption that her coverage had lapsed. However, in your case, since she had not made any contributions to her HSA (not having one), she could not have used the last-month rule. In this case, you would answer NONE to the question about her coverage on December 31, 2022. This will circumvent the lapse message and allow you to continue.