Public Law 119-21 (the One, Big, Beautiful Bill Act, signed July 4, 2025) changed who can contribute to a health savings account under section 223. Three changes matter for client work: bronze and catastrophic marketplace plans now count as high deductible health plans, the telehealth safe harbor is permanent, and a direct primary care arrangement no longer blocks HSA eligibility if the fee stays under a monthly cap. The IRS explained all three in Notice 2026-5. This article covers the rules a tax practice needs when a client asks, "Can I still fund my HSA?"
Which bronze and catastrophic plans are now HSA-eligible?
Section 71307 of the act amended section 223(c)(2) so that an HDHP includes any plan described in section 1302(d)(1)(A) (bronze) or 1302(e) (catastrophic) of the Affordable Care Act that is available as individual coverage through an Exchange. The change applies for months beginning after December 31, 2025.
The practical effect is that the plan no longer has to meet the HDHP minimum deductible or out-of-pocket maximum. Before the act, many bronze plans failed because their out-of-pocket maximum was above the statutory limit or because they paid some non-preventive benefits before the deductible. Catastrophic plans failed because they had to cover primary care visits before the deductible was met.
Notice 2026-5 answers the edge cases:
- Off-Exchange purchase: A bronze or catastrophic plan bought off-Exchange on the individual market is treated as an HDHP if the same plan is available as individual coverage through an Exchange.
- Good-faith enrollment: If the individual enrolls in an individual-market plan that is not on an Exchange and has no reason to believe it is unavailable there, the IRS treats the individual as eligible.
- Employer reimbursement: Using an individual coverage HRA or a qualified small employer HRA to buy the plan does not stop the plan from being an HDHP. An HRA generally may reimburse only premiums if the employee is to stay an eligible individual.
- SHOP plans: Bronze plans offered through the Small Business Health Options Program are generally not individual coverage, so they do not get the new treatment. They can still qualify if they meet the ordinary deductible and out-of-pocket tests.
- Actuarial value above 60 percent: A bronze plan whose real actuarial value exceeds 60 percent because of permitted variance or cost-sharing reductions for American Indians and Alaska Natives is still a bronze plan and still an HDHP.
What happened to the telehealth safe harbor?
Section 71306 made permanent the safe harbor that lets a plan cover telehealth and other remote care before the deductible without losing HDHP status. The permanent rule applies retroactively to plan years beginning after December 31, 2024, so a client who contributed for 2025 while enrolled in a plan with pre-deductible telehealth coverage is not penalized, whether the contribution was made before or after July 4, 2025.
The scope is narrower than many clients assume. A plan does not fail as an HDHP if it covers, without a deductible, a service on the annual Medicare telehealth list published by HHS. Other services are tested against the Medicare telehealth principles. In-person services, medical equipment and drugs furnished in connection with a telehealth visit are not covered by the safe harbor.
How do direct primary care arrangements work now?
Section 71308 added section 223(c)(1)(E). A direct primary care service arrangement (DPCSA) is not treated as a health plan for the "no other coverage" test, so enrolling in one no longer disqualifies a person who also has an HDHP. The rule applies to months beginning after December 31, 2025.
To qualify, the arrangement must meet each of these conditions:
- It provides only primary care services delivered by primary care practitioners (family medicine, internal medicine, geriatric medicine or pediatric medicine physicians, nurse practitioners, clinical nurse specialists or physician assistants).
- The sole compensation is a fixed periodic fee. An arrangement that charges a membership fee and bills separately for services is not a DPCSA.
- It excludes procedures requiring general anesthesia, prescription drugs other than vaccines, and laboratory services not typically administered in an ambulatory primary care setting.
- The aggregate fees for all DPCSAs for the individual do not exceed $150 per month, or $300 per month for an arrangement covering more than one individual. These amounts are indexed for taxable years after 2026.
Fees may be billed for periods longer than a month, up to a year, as long as they are fixed and periodic and stay within the monthly cap on an annualized basis. For 2026 the notice gives $1,800 for a year, $900 for six months or $450 for three months for a single individual.
Eligibility turns on the terms of the arrangement, not on use. A member cannot decline the extra services and treat an over-scope arrangement as a DPCSA.
What is the HSA treatment of DPC fees?
Section 71308 also amended section 223(d)(2)(C), so DPCSA fees are not "insurance" for the rule that bars HSA payment of premiums. Notice 2026-5 adds three points:
- Fees above the monthly cap are still reimbursable from an HSA as a medical expense, but the individual cannot contribute to the HSA while enrolled.
- Fees paid by an employer, including through salary reduction in a cafeteria plan, are not HSA expenses of the employee. They are compensation excluded under section 106.
- An HSA may treat a DPCSA fee as incurred on the first day of each month of coverage (pro rata), the first day of the coverage period, or the date the fee is paid. A prepaid fee for a January start can be reimbursed immediately.
An HDHP also cannot count the member's DPCSA fees toward its deductible or out-of-pocket maximum, and it cannot offer DPCSA membership as a pre-deductible benefit.
Worked example: does a $175 monthly membership break eligibility?
A single client has HDHP coverage and joins a primary care practice for a flat $175 per month in 2026.
- Cap for one individual: $150 per month.
- Excess: $175 minus $150 = $25 per month.
- Result: the arrangement is not a DPCSA under section 223(c)(1)(E), so it counts as other health coverage and the client cannot contribute to the HSA for months of enrollment.
The same fee does not stop the client from paying the $175 from the HSA as a medical expense. The facts change if the client pays $1,800 for the year ($150 per month on an annualized basis): the arrangement meets the cap and the client keeps contribution eligibility, which stays within the 2026 annual limit of $4,400 for self-only coverage.
A family of four paying $280 per month under one arrangement is under the $300 family cap. The same family buying two separate arrangements that total more than $300 in the aggregate would not be. Aggregate fees across arrangements count.
What should the practice collect at intake?
For 2026 returns, ask for the plan's metal level and whether it is sold on an Exchange, the DPC agreement and its fee schedule, any employer HRA terms, and the months each coverage was in force. Rev. Proc. 2025-19 sets the 2026 contribution limits at $4,400 for self-only coverage and $8,750 for family coverage, with HDHP minimum deductibles of $1,700 and $3,400. Keep the plan documents with the workpapers, since eligibility is tested month by month.
For other 2026 indexed figures, see 2026 inflation adjustments from Rev. Proc. 2025-32 and the client meeting checklist for 2026 business tax changes. The tax season workflow shows where to place this intake step.
CORAA prepares ready-to-review audit files for US CPA firms; see /us.
Sources
- IRS, Notice 2026-5, Expanded Availability of Health Savings Accounts under the One, Big, Beautiful Bill Act: https://www.irs.gov/pub/irs-drop/n-26-05.pdf
- IRS, Rev. Proc. 2025-19, 2026 inflation adjusted amounts for health savings accounts: https://www.irs.gov/pub/irs-drop/rp-25-19.pdf
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