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IRS Issues Guidance on OBBBA Expansion of Health Savings Accounts
(Parker Tax Publishing December 2025)
The IRS issued a notice to provide guidance on changes to Code Sec. 223 relating to health savings accounts (HSAs) enacted by the One Big Beautiful Bill Act (OBBBA). The legislative changes expand the availability of HSAs by allowing taxpayers with high deductible health plans (HDHPs) to receive telehealth services, making bronze and catastrophic plans available through an Exchange eligible to be treated as HDHPs, and permitting otherwise eligible individuals enrolled in certain direct primary care service arrangements to contribute to HSAs. Notice 2026-5.
Background
Code Sec. 223 permits eligible individuals to establish a health savings account (HSA). HSAs are accounts that can receive tax-favored contributions by or on behalf of eligible individuals. Amounts in an HSA may be used on a tax-free basis to pay or reimburse medical expenses. Among the requirements to qualify as an eligible individual under Code Sec. 223(c)(1) is that the individual be covered under a high deductible health plan (HDHP) and have no disqualifying health coverage. As defined in Code Sec. 223(c)(2), an HDHP is a health plan that satisfies certain requirements, including requirements with respect to minimum deductibles and maximum out-of-pocket expenses. Only eligible individuals under Code Sec. 223(c)(1) are allowed to make contributions to an HSA or to receive contributions from an employer to their HSA.
Generally, under Code Sec. 223(c)(2)(A), an HDHP is not permitted to provide benefits for any year until the minimum annual deductible for that year is satisfied and is not permitted to require a payment of an annual deductible plus other annual out-of-pocket expenses (other than premiums) above the out-of-pocket maximum for the year. However, Code Sec. 223(c)(2)(C) provides a safe harbor for the absence of a deductible for preventive care.
The minimum annual deductible and out-of-pocket maximum are adjusted annually for inflation. The minimum annual deductible for 2025 is $1,650 for self-only coverage and $3,300 for family coverage, and the out-of-pocket maximum for 2025 is $8,300 for self-only coverage and $16,600 for family coverage.
OBBBA Changes to Section 223
The One Big Beautiful Bill Act (OBBBA) (Pub. L. 119-21) made the following changes to Code Sec. 223, which generally expand the availability of HSAs.
Telehealth and Remote Care Services: The OBBBA made permanent a safe harbor allowing individuals to receive telehealth and other remote care services before meeting the high-deductible health plan (HDHP) deductible while remaining eligible to contribute to an HSA, effective for plan years beginning on or after Jan. 1, 2025. This safe harbor was enacted on a temporary basis as part of the CARES Act (Pub. L. 116-136) in 2020 and then extended by subsequent legislation through 2024.
Bronze and Catastrophic Plans Treated as HDHPs: The OBBBA amended Code Sec. 223(c)(2) to provide that, as of January 1, 2026, bronze and catastrophic plans available through an Exchange are treated as HDHPs, regardless of whether the plans satisfy the general definition of an HDHP. Under the Affordable Care Act (ACA), a bronze plan provides a level of coverage that is designed to provide benefits that are actuarially equivalent to 80 percent of the full actuarial value of the benefits provided under the plan. A catastrophic plan is a health plan solely offered in the individual market that does not provide bronze or higher levels of coverage, and that generally provides essential health benefits only after an individual has incurred the maximum cost sharing under the ACA (other than required preventive health care and coverage for at least three primary care visits).
Direct Primary Care Service Arrangements: The OBBBA amended Code Sec. 223(c)(1) to provide that, beginning Jan. 1, 2026, an otherwise eligible individual enrolled in certain direct primary care (DPC) service arrangements may contribute to an HSA. In addition, such individuals may use their HSA funds tax-free to pay periodic DPC fees. Direct primary care service arrangements (DPCSAs) typically charge a fixed periodic fee and provide for an array of primary care services and items, such as physical examinations, vaccinations, urgent care, laboratory testing, and the diagnosis and treatment of some sicknesses and injuries. For the purposes of eligibility to contribute to an HSA, this type of DPCSA generally would constitute a health plan that provides coverage before the minimum annual deductible is satisfied and that is not disregarded coverage or preventive care. Therefore, an individual generally was not eligible to contribute to an HSA if the individual was enrolled in a DPCSA prior to this change.
Notice 2026-5
On December 9, the IRS issued Notice 2026-5 to provide guidance in question-and-answer format on the OBBBA changes to Code Sec. 223.
Telehealth Services. The notice includes the following guidance regarding telehealth and remote care services:
An otherwise eligible individual may contribute to an HSA for 2025 if, before the OBBBA was enacted on July 4, 2025, the individual was enrolled in a plan that provided coverage for telehealth or other remote care services before the minimum deductible was satisfied, if the plan otherwise satisfied the requirements to be treated as an HDHP. This is true regardless of whether the contribution is made before or after July 4, 2025.
A plan will not fail to be an HDHP solely because it offers telehealth benefits without a deductible for a service that is included on the list of telehealth services payable by Medicare that is published annually by the Department of Health and Human Services (HHS). For services that are not included on the HHS list, taxpayers should apply the principles of Section 1834(m) of the SSA, its implementing regulations at 42 CFR 410.78, and other guidance issued by HHS defining "telehealth services" and related terms.
Telehealth or other remote care services do not extend to in-person services, medical equipment, or drugs furnished in connection with those services unless they would otherwise be treated as telehealth services under HHS guidance.
Bronze and Catastrophic plans. The following guidance relates to the treatment of bronze and catastrophic plans as HDHPs:
For months beginning after December 31, 2025, a bronze or catastrophic plan will be treated as an HDHP if the plan is available as individual coverage through an Exchange, even if the plan does not satisfy the minimum annual deductible requirement or maximum out-of-pocket expenses requirement for an HDHP under Code Sec. 223(c)(2)(A)(i) and (ii).
A bronze or catastrophic plan that is available as individual coverage will not fail to be an HDHP because an employer-sponsored individual coverage health reimbursement arrangement (ICHRA) is used to purchase the coverage. However, generally, an HRA (including an ICHRA) is permitted to reimburse only premiums for the HRA to be a health plan that would not disqualify an employee from being an eligible individual.
A bronze or catastrophic plan purchased off-Exchange on the individual market will be treated as an HDHP if the same plan is available as individual coverage through an Exchange. This includes plans sold exclusively off-Exchange without a cost-sharing reduction load that are otherwise identical to plans sold on-Exchange with a cost sharing reduction load.
Because the ability of an individual to determine whether a particular plan is available on an Exchange is limited, the IRS will treat an individual as an eligible individual if the individual enrolls in a bronze or catastrophic plan that is available as individual coverage on the individual market but not on an Exchange, and the individual has no reason to believe that the bronze or catastrophic plan is not available on an Exchange.
Direct Primary Care Service Arrangements. Regarding direct primary care service arrangements, Notice 2026-5 includes the following guidance:
DPCSA fees paid by an individual's employer, including by salary reduction through a Code Sec. 125 cafeteria plan, are not expenses of the HSA beneficiary and thus are not treated as amounts paid for qualified medical expenses under Code Sec. 223(d)(2). The payments are compensation excluded from employees' gross income under Code Sec. 106.
For purposes of Code Sec. 223(d)(2), a DPCSA is an arrangement under which an individual is provided medical care (as defined in Code Sec. 213(d)) consisting solely of primary care services provided by primary care practitioners, if the sole compensation for such care is a fixed periodic fee, and such care does not include (1) procedures that require the use of general anesthesia, (2) prescription drugs other than vaccines, or (3) laboratory services not typically administered in an ambulatory primary care setting. For purposes of Code Sec. 223(d)(2), there is no specific limit on the amount of the fixed periodic fee as there is for purposes of determining whether a DPCSA is a health plan under Code Sec. 223(c)(1)(E). Thus, fees for a DPCSA that do not satisfy the monthly dollar limit in Code Sec. 223(c)(1)(E)(ii)(II) will be treated as medical expenses reimbursable from an HSA in accordance with Code Sec. 223(d)(2)(C)(v) but will disqualify the covered individual from eligibility for making HSA contributions while the individual is enrolled.
For a discussion of health savings accounts, see Parker Tax ¶81,100.
Disclaimer: This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations. This analysis is not tax advice and is not intended or written to be used, and cannot be used, for purposes of avoiding tax penalties that may be imposed on any taxpayer. The information contained herein is general in nature and based on authorities that are subject to change. Parker Tax Publishing guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Parker Tax Publishing assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein.
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