Prior law
Prior to the enactment of the One Big Beautiful Bill Act, to contribute to or to receive employer contributions to a health savings account (HSA) the account owner needed to be covered under a high deductible health plan (HDHP) and generally could not have other health coverage. The only exception to the high deductible requirement was for a preventive care service, e.g., an annual checkup, immunizations and certain screenings for which an insurance policy or employer plan can provide first dollar coverage, i.e., $0 deductible when provided by an in-network doctor. Further, to qualify as an HDHP, the deductible could not be too low or too high; it had to fit within statutory limits (indexed annually). The bronze and catastrophic plans introduced by the Affordable Care Act (ACA) did not fit within these statutory limits for HDHPs. Further, individuals who participated in direct primary care arrangements were ineligible to participate in an HSA.
OBBBA changes
The OBBBA made three key changes to the rules surrounding HSAs and HDHPs, by:
- Making permanent a Covid-era change that, as a part of the Coronavirus Aid, Relief, and Economic Security Act (CARES) Act, allowed HDHPs to offer zero deductible telehealth services without impacting HSA eligibility,
- Reclassifying bronze and catastrophic plans as offered by the ACA Exchanges as qualifying HDHPs, and
- Providing that participation in certain direct primary care arrangements would not preclude HSA eligibility.
Key terms
- Bronze plans. A bronze plan is a health insurance plan with lower premiums but higher out-of-pocket costs (deductibles/copayments). These plans typically cover 60% of medical costs, while the insured pays 40%. These are generally purchased by individuals wanting protection against severe, costly illnesses, but able to afford higher out-of-pocket costs.
- Catastrophic plans. These plans have even lower premiums than Bronze plans but correspondingly higher out-of-pocket costs (e.g., the insured pays the first $10,000 in costs).
- HSA. An HSA is a tax-advantaged savings account for qualified medical expenses, available only in conjunction with an HDHP. HSA accounts offer triple tax benefits: tax-deductible contributions, tax-free growth and tax-free withdrawals for health costs. They can serve as long-term savings/investment tools for healthcare, even in retirement. HSA accounts belong to the individual. For more information on HSAs, see this article.
- ICHRA. An Individual Coverage Health Reimbursement Arrangement (ICHRA) is an employer-funded, tax-advantaged health benefit that allows employers to reimburse employees for individual health insurance premiums and qualified medical expenses. For more information on ICHRAs see this article.
- Direct Primary Care arrangement. A direct primary care (DPC) arrangement is one where patients pay a flat, periodic fee (usually monthly) directly to their doctor’s office. In return, the medical group does not bill the patient’s insurance company for the service. To pair a DPC arrangement and an HSA, the DPC must meet specific criteria regarding the scope of services and maximum fees. While not setting forth an exact definition of a DPC, the notice provides that a direct primary care arrangement means an arrangement that provides individuals solely with primary care services provided by primary care practitioners, and the provider’s sole compensation for such care is a fixed periodic fee, and such fee does not exceed $150 per month for an individual and $300 per month for family coverage.
Notice 2026-5: the details
- Telehealth services. The notice clarified what services qualify as permitted telehealth services that would not cause a plan or policy to fail to be an HDHP. The notice states that taxpayers can refer to the list of telehealth services that Medicare publishes annually; if a telehealth service is not on that list, the taxpayer could refer other relevant guidance issued by Health and Human Services. The IRS specifically confirmed that any in-person services, medical equipment or drugs provided in connection with the telehealth services would be subject to the HDHP normal deductible rules.
- Reclassification of Bronze and Catastrophic plans. OBBBA reclassified bronze and catastrophic health plans purchased through the exchange as meeting the HDHP requirements to be plans that are HSA eligible, even though the plan may not meet the minimum or maximum deductible and out-of-pocket cost rules that otherwise apply to HDHPs. Further, the notice clarified that taxpayers do not have to purchase bronze and catastrophic plans through an exchange to have the policy qualify as a HDHP. The availability of off-exchange purchases will facilitate the use of these plans by employers that use individual coverage health reimbursement accounts (ICHRAs). This new HSA compatibility will allow employees to have the premium cost reimbursed by the employer through the ICHRA while the employee contributes funds to their HSAs.
- Direct Primary Care arrangements. Beginning Jan. 1, 2026, an otherwise eligible individual enrolled in certain DPC arrangements may contribute to an HSA. In addition, they may use their HSA funds tax-free to pay periodic DPC fees.
