A health savings account (HSA) can be used to cover out-of-pocket expenses with tax-advantaged savings.
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The IRS has released new guidance on health savings account (HSA) updates as part of the One Big Beautiful Bill Act (OBBBA). OBBBA expanded HSA eligibility and updated high-deductible health plan (HDHP) rules.
The guidance explains the changes and addresses questions related to telehealth services, bronzes, and catastrophic plans under the Affordable Care Act (ACA) that are treated as high-deductible health plans (HDHPs) and direct primary care settings.
What are HSAs?
HSAs were established by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, which was signed into law on December 8, 2003. Among other things, the law created Medicare Part D, a prescription drug benefit for Medicare beneficiaries. HSAs became officially available on January 1, 2004.
(For a quick primer on Medicare, click here.)
It is no coincidence that the 2003 law also established HDHPs, as the two were intended to work together. The idea was to allow insurance plans that cover significant expenses to be paid for with lower premiums—you could use your HSA to cover out-of-pocket costs with tax-advantaged savings.
See how it works. You can make pre-tax contributions to your HSA from your paycheck. Your employer can also kick in funds. Employer contributions are not considered income for tax purposes, so not only is it free money, it’s also tax-free.
It gets better. Funds in an HSA grow federally income tax-free. And when do 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 money each year or lose it, you can roll over your HSA contributions from year to year and keep saving. 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 people want to make contributions on your behalf, that’s okay, too, subject to contribution limits.
The more money you can set aside, the more 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), and 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 has changed under the OBBBA with respect to HSAs?
OBBBA made significant changes to HSAs that focused on telehealth services, copper and catastrophic plans under the ACA that are treated as HDHPs and direct primary care arrangements.
What has changed in relation to telehealth?
During the pandemic, Congress temporarily allowed HDHPs to cover telehealth services without compromising HSA eligibility. Without further extension, the provisions were scheduled to expire. OBBBA made the telehealth safe harbor a permanent part of the HDHP rules, retroactive to plan years beginning after December 31, 2024.
In practical terms, this means that if your plan covers telehealth visits, such as virtual primary care or mental health video consultations, before your deductible is met, you may qualify for HSA contributions.
A service only counts if it fits Medicare annual list of billable telehealth services or if it aligns with Department of Health and Human Services (HHS) definitions. The rules are very specific. If you go to a clinic for lab work or pick up medical equipment during a telehealth appointment, these additional items are not automatically treated as telehealth services. They must independently meet the telehealth criteria or they will be subject to the plan discount.
What about ACA copper and catastrophic plans?
Prior to OBBBA, many ACA copper plans and nearly all catastrophic plans failed to qualify as HDHPs—often because the caps exceeded HDHP limits or because they covered certain 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 deductibles or caps exceed traditional HDHP limits. This opens HSA access to people who prefer lower quality copper or catastrophic plans but previously had to choose between affordability and HSA eligibility.
A bronze or catastrophic level plan purchased off-exchange will qualify as an HDHP if the same plan is available as individual coverage through an Exchange. This includes off-Exchange packages, even if they do not include the cost-sharing reduction pricing adjustment in the on-Exchange version.
And, in the interest of what the IRS refers to as “good tax administration,” the IRS has determined that if you mistakenly purchase a copper or catastrophic plan off the exchange, but reasonably believe it is eligible, the IRS will treat it as eligible for HSA purposes.
The Notice also examines nuances related to actuarial values—that is, the average percentage of total medical costs that a health plan pays for a typical population, defining its “metal tier.” The higher the rate, the more the plan pays and the less you pay for care — premiums are generally higher, too. For a copper design, this is 60% (it’s 70% for silver, 80% for gold, and 90% for platinum). Some copper plans, especially those designed for American Indians and Alaska Natives, may provide higher coverage because of 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 has revised its previous guidance on the Indian Health Services (IHS). Previously, receiving care at an IHS facility could temporarily disqualify you from contributing to an HSA. This limitation no longer applies when you are enrolled in a reduced cost share bronze plan designed for American Indians and Alaska Natives. This means that if you receive care from the IHS, it will not affect your HSA eligibility.
What does the IRS say about direct primary care service arrangements (DPCSA)?
A Direct Primary Care Service Agreement (DPCSA) is a health care agreement in which you pay a fixed, periodic fee (usually monthly) directly to a primary care provider in exchange for services. It is essentially a subscription or subscription model for primary care with no insurance charge, no per-visit charges, and no co-pays.
Historically, these arrangements caused problems for HSA eligibility because they were considered “other coverage.” However, the IRS has clarified that qualified DPCSAs are not considered health insurance for HSA purposes. This means you can participate in a direct primary care arrangement and contribute to an HSA, provided certain conditions are met. These conditions include that the services must be for primary care and the only payment allowed is a fixed recurring fee, with no per-service charge. The setting cannot include procedures that require general anesthesia (so, generally, no surgeries), prescription drugs other than vaccines, or laboratory services not routinely 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 starting in 2027.
A DPCSA is not considered insurance, so fees can only be reimbursed by an HSA if you pay out of pocket. Payments made by an employer or through salary reduction in a cafeteria plan do not qualify.
Importantly, if your DPCSA fees exceed the monthly limit, you cannot contribute to an HSA for those months, but the fees remain reimbursable as qualified medical expenses. This means that—as with all things tax—keeping excellent records is important.
Where can I find guidance?
Announcement 2026-5 provides an overview of the new tax benefits for HSA participants under the OBBBA. These changes expand HSA eligibility, allowing more people to save and pay for health care expenses through tax-free HSAs.
What’s next for taxpayers?
The IRS is seeking public comments on the Notice until March 6, 2026. You can submit your comments online at Federal e-Rulemaking Portal (reference IRS-2025-0335). You may also submit a paper submission by mail to: Internal Revenue Service, CC:PA:01:PR (Notice 2026-05), Room 5503, PO Box 7604, Ben Franklin Station, Washington, DC 20044.
There is more information on OBBBA, so check back Forbes. To make it easy, I recommend signing up for our free tax newsletter—that way, the information you need will be delivered to your inbox every Saturday morning.
