A health savings account (HSA) can be used to cover out-of-pocket costs with tax-advantaged savings.
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The IRS has released new guidance on updates to Health Savings Account (HSA) as part of the One Big Beautiful Bill Act (OBBBA). OBBBA expanded eligibility for HSAs and updated high-deductible health plan (HDHP) rules. The guidance explains the changes and addresses questions related to telehealth services, bronze and catastrophic plans under the Affordable Care Act (ACA) treated as high-deductible health plans (HDHPs), and direct primary care arrangements..
What are HSAs?
HSAs were established by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, signed into law on December 8, 2003. Among other things, the law created Medicare Part D, a prescription drug benefit for Medicare beneficiaries. HSAs officially became available starting January 1, 2004.
(For a quick primer on Medicare, click here.)
It’s no coincidence that the 2003 law also established HDHPs since the two were meant to work together. The idea was to allow insurance plans that cover major expenses to be paid with lower premiums—you could use your HSA to cover out-of-pocket costs with tax-advantaged savings.
Here’s how it works. You can make pre-tax contributions to your HSA out of your paycheck. Your employer may also kick in funds. Employer contributions are not considered income for tax purposes, so not only is it free money, it’s tax-free.
It gets better. Funds in an HSA grow federal income tax-free. And when you take them out? Distributions for qualified medical expenses (including dental and vision expenses) are not taxable for federal income tax purposes.
And unlike a Flexible Spending Account (FSA) that requires you to spend your funds each year or lose them, you can roll over your HSA contributions from year to year and continue to save. Plus, an HSA is portable, meaning you can keep it even if you change employers, retire, or otherwise leave the workforce.
You and your employer can make contributions to your HSA in the same year. If family members or other folks want to make contributions on your behalf, that’s okay, too, subject to contribution limits.
The more money that you can put away, the money you can save, subject to IRS limits. In 2025, the annual contribution limit for an individual with self-only coverage under an HDHP will be $4,300 ($8,550 for a family), while at age 55, individuals can contribute an additional $1,000. In 2026, the individual limit will be $4,400 ($8,750 for a family), and at age 55, individuals can contribute an additional $1,000.
What Changed Under OBBBA?
OBBBA made significant changes to HSAs focused on telehealth services, bronze and catastrophic plans under the ACA treated as HDHPs, and direct primary care arrangements.
What Changed With Regard To Telehealth?
During the pandemic, Congress temporarily allowed HDHPs to cover telehealth services without jeopardizing any HSA eligibility. Without another extension, the provisions were scheduled to expire. OBBBA made the telehealth safe harbor a permanent part of the HDHP rules, effective retroactively for plan years beginning after December 31, 2024.
Practically, this means that if your plan covers telehealth visits, like virtual primary care or mental health video consultations, before your deductible is met, you can still qualify for HSA contributions.
A service counts only if it fits within Medicare’s annual list of payable telehealth services or if it aligns with the Department of Health and Human Service (HHS)’s definitions. The rules are very specific. If you go to a clinic for lab work or pick up medical equipment during a telehealth encounter, those add-on items are not automatically treated as telehealth services. They must independently meet the telehealth criteria, or they remain subject to the plan’s deductible.
What About Bronze and Catastrophic ACA Plans?
Before OBBBA, many ACA bronze plans and virtually all catastrophic plans failed to qualify as HDHPs—often because their out-of-pocket maximums exceeded HDHP limits or because they covered some services before the deductible.
Beginning in 2026, any bronze-level or catastrophic plan offered as individual coverage through an ACA Exchange will automatically be treated as an HDHP for HSA purposes. This is true even if the deductibles or out-of-pocket maximums exceed the traditional HDHP limits. This opens HSA access to folks who prefer lower-premium bronze or catastrophic plans but previously had to choose between affordability and HSA eligibility.
A bronze-level or catastrophic plan purchased off-Exchange will also qualify as an HDHP if the same plan is available as individual coverage through an Exchange. This includes off-Exchange plans even if they don’t include the cost-sharing reduction pricing adjustment in the on-Exchange version.
And, in the interest of what the IRS refers to as “sound tax administration”, the IRS has determined that if you unintentionally buy an off-Exchange bronze or catastrophic plan, but reasonably believe it’s eligible, the IRS will treat it as qualifying for purposes of the HSA.
(Small Business Health Options Program (SHOP) coverage that may be offered by a small employer is not individual coverage and doesn’t meet the criteria to be treated as an HDHP. However, the Notice makes clear that such a plan can still be an HDHP if it otherwise satisfies the applicable requirements.)
The Notice also addresses nuances related to actuarial values—that’s the average percentage of total medical costs a health plan pays for a standard population, defining its “metal tier.” The higher the percentage, the more the plan pays and the less you pay for care—premiums are generally also higher. For a bronze plan, that’s 60% (it’s 70% for silver, 80% for gold and 90% for platinum). Some bronze plans, especially those designed for American Indians and Alaska Natives, may provide higher coverage due to special cost-sharing rules. Even if their actuarial value exceeds 60%, HHS still classifies them as bronze, making them HDHPs under the new rule.
Finally, the IRS revised its past guidance regarding Indian Health Services (IHS). Previously, receiving care at an IHS facility could temporarily disqualify you from contributing to an HSA. This restriction no longer applies when you are enrolled in a cost-sharing-reduced bronze plan designed for American Indians and Alaska Natives. That means that if you are receiving care from IHS, it won’t affect your HSA eligibility.
What Does The IRS Say About Direct Primary Care Service Arrangements (DPCSAs)?
A Direct Primary Care Service Arrangement (DPCSA) is a healthcare arrangement in which you pay a flat, periodic fee (usually monthly) directly to a primary care provider in exchange for services. It’s essentially a membership or subscription model for primary care with no insurance billing, no per-visit charges, and no copays.
Historically, these arrangements caused issues for HSA eligibility because they were viewed as “other coverage.” However, the IRS has clarified that qualified DPCSAs are not considered health insurance for HSA purposes. This means that you can engage in a direct primary care arrangement and still contribute to an HSA, provided certain conditions are met. Those conditions include that services must be for primary care and the only allowable payment is a fixed periodic fee, with no per-service billing. The arrangement cannot include procedures requiring general anesthesia, prescription drugs other than vaccines, or lab services not typically performed in a primary care setting. And, total DPCSA fees cannot exceed $150 per month ($300 for multi-person arrangements)—those amounts will be adjusted for inflation beginning in 2027.
A DPCSA isn’t considered insurance, so fees can be reimbursed from an HSA only if you pay out of pocket. Payments made by an employer or through a cafeteria-plan salary reduction do not qualify.
Importantly, if DPCSA fees exceed the monthly limit, you can’t contribute to an HSA for those months, but the fees remain reimbursable as qualified medical expenses. That means—as with everything tax—keeping excellent records is important.
Where Can I Find The Guidance?
Notice 2026-5 provides an overview of new tax benefits for HSA participants under OBBBA. These changes expand HSA eligibility, allowing more people to save for and pay healthcare costs through tax-free HSAs.
What’s Next For Taxpayers?
The IRS is seeking public comments on the Notice by March 6, 2026. You can submit your comments online via Federal e-Rulemaking portal (indicate IRS-2025-0335). You can also submit a paper submission by mail to: Internal Revenue Service, CC:PA:01:PR (Notice 2026-05), Room 5503, P.O. Box 7604, Ben Franklin Station, Washington, DC 20044.
There’s more information to come on OBBBA, so check back with Forbes. To keep it easy, I recommend that you subscribe to our free tax newsletter—that way, the information you need will land in your email inbox each Saturday morning.
Source: https://www.forbes.com/sites/kellyphillipserb/2025/12/09/irs-issues-guidance-for-expanded-health-savings-accounts-under-new-tax-law/
