IRS Issues Notice on New HSA Flexibility Under H.R. 1

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The Internal Revenue Service (IRS) released on December 9 to answer key questions regarding the expanded flexibilities for HSAs and associated high-deductible health plans (HDHPs) included in H.R. 1.

HSAs are tax-advantaged accounts that allow an enrollee in a HDHP to contribute pre-tax dollars, accrue investment income on contributions, and use those funds tax-free for medical expenses. H.R. 1 expands HSA availability in coverage of telehealth and other remote care services, direct primary care service arrangements (DPCSAs), and for people who enroll in bronze or catastrophic plans, inside or outside of the Marketplace.

• Telehealth and Other Remote Care Services. H.R. 1 made permanent the COVID-era safe harbor allowing telehealth services to be offered pre-deductible in an HDHP without the plan losing its HDHP status (thereby allowing it to be paired with an HSA). The provision expired for plan years beginning after January 1, 2025, but H.R. 1’s permanent extension applies retroactively for plan years beginning after December 31, 2024. Telehealth and other remote care services are defined broadly. Pre-deductible telehealth services are those published annually by HHS for Medicare under section 1834(m) of the Social Security Act. However, for services not on that list, the guidance advises that “taxpayers should apply the principles” of that statute, its regulations, and other IRS telehealth guidance. IRS makes clear that the exception does not extend to in-person services, medical equipment, or drugs that may be furnished in connection with the telehealth service.  
• DPCSAs. DPCSAs are memberships that charge a periodic fee for primary care services, such as physical examinations, diagnosis and treatment of some illnesses or injuries, vaccinations, and certain other services provided by a primary care practitioner. Previously, having a DPCSA (or any other health plan that was not a HDHP) disqualified a person from contributing to an HSA. Beginning after December 31, 2025, H.R. 1 changes that by stating that a DPCSA is not a “health plan,” and so a person may enroll in a DPCSA and still contribute to an HSA (if they are also enrolled in an HDHP). Tying to Medicare definitions, a primary care provider is defined to include physicians specializing in family medicine, internal medicine, geriatric medicine, or pediatric medicine, or a nurse practitioner, clinical nurse specialist, or physician assistant. Primary care does not include: 1) procedures requiring the use of general anesthesia, 2) prescription drugs other than vaccines, or 3) laboratory services not typically administered in an ambulatory care setting.

IRS also states that, to be a DPCSA, “the sole compensation for care provided under the DPCSA must be the fixed periodic fee” and the primary care provider cannot separately bill for those items. Further, the fixed fee must be no greater than $150 per month; if that amount is exceeded, a taxpayer can pay the DPCSA with HSA funds but cannot contribute to their HSA. DPCSA memberships cannot be paid on a pre-deductible basis by an HDHP.

• Bronze and Catastrophic Plans. H.R. 1 terms all bronze and catastrophic plans as HDHPs beginning January 1, 2026. While these plans have high deductibles, they sometimes do not meet the definition of an HDHP because they either offer pre-deductible medical services that are not included in the safe-harbor or because their out-of-pocket maximum exceeds the IRS limits for HDHPs. The guidance clarifies that the new rule applies to both on- and off-Marketplace plans. It also permits bronze plans to be considered HDHPs even if their actuarial value deviates from the statutory 60 percent, as long as they meet CMS’s standards for de minimis variation.

The IRS is accepting comments on this notice until March 6, 2026.

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