IRS Update on Health Savings Accounts (HSAs)
The IRS has put out new information regarding changes to Health Savings Accounts (HSAs) as part of the One Big Beautiful Bill Act (OBBBA). This legislation broadens the eligibility criteria for HSAs and modifies the rules surrounding high-deductible health plans (HDHPs).
This guidance outlines recent changes and clarifies questions concerning telehealth services, as well as specific bronze and catastrophic plans under the Affordable Care Act (ACA) that qualify as HDHPs, along with in-person primary care arrangements.
Understanding HSAs
The HSA concept was established by the Medicare Prescription Drug Improvement and Modernization Act of 2003, which was signed into law on December 8, 2003. This law also introduced Medicare Part D, which is a prescription drug benefit for beneficiaries. HSAs became available to the public starting January 1, 2004.
It’s worth noting that this 2003 legislation also introduced the HDHP, as the two are intended to complement each other. The idea here was to offer lower premiums for insurance that covers major medical expenses while allowing HSAs to handle out-of-pocket costs in a tax-efficient manner.
So, how do HSAs operate? You can contribute pre-tax money from your paycheck, and employers may also add contributions. The money your employer contributes isn’t taxed, meaning it’s an added benefit and also tax-free.
Additionally, HSA funds grow income tax-free at the federal level. When you withdraw money for qualified medical expenses—dental and vision included—those funds aren’t taxed either.
You can carry over your HSA contributions each year, unlike Flexible Spending Accounts (FSAs) that make you forfeit unused funds. HSAs are also portable, which means you retain your HSA if you switch jobs, retire, or leave the workforce.
Contributions can come from both you and your employer during the same year. If a relative or someone else wishes to contribute on your behalf, they can, subject to certain limits.
The potential for saving money through HSAs is greater, subject to IRS limits. For 2025, the contribution cap for individuals with self-only HDHP coverage is $4,300 ($8,550 for families). Individuals aged 55 and older can add an extra $1,000. In 2026, this will rise to $4,400 ($8,750 for families), with the same additional contribution allowance for those 55 and older.
Changes Brought by OBBBA
OBBBA introduces notable changes to HSAs, especially concerning telehealth services, bronze and catastrophic ACA plans treated as HDHPs, and direct primary care arrangements.
Telehealth Updates
During the pandemic, Congress allowed HDHPs to cover telehealth services while maintaining HSA eligibility. This temporary provision was set to expire without further intervention. OBBBA has now made the telehealth safe harbor a permanent feature of the HDHP guidelines, effective retroactively for plans beginning after December 31, 2024.
What this means in real terms is that if your health plan includes telehealth visits—like virtual primary care or mental health consultations—before you’ve met your deductible, you can still contribute to your HSA.
However, the services must align with Medicare coverage guidelines or the definition set by the Department of Health and Human Services (HHS). The regulations are quite specific; for instance, if lab tests or medical equipment are obtained during a telehealth visit, those may not automatically count as telehealth services unless they meet strict telemedicine standards.
The Situation with ACA Bronze and Catastrophic Plans
Previously, many ACA Bronze and virtually all catastrophic plans did not qualify as HDHPs due to often exceeding out-of-pocket limits or covering certain services before the deductible was met.
Starting in 2026, bronze and catastrophic plans available as separate coverage through the ACA Exchange will automatically qualify as HDHPs for HSA purposes. This holds true even if they exceed traditional HDHP limits, making HSAs accessible to those who wish to opt for lower-premium plans.
Moreover, bronze or catastrophic plans purchased outside of the Exchange can qualify if the same plan version is present through the Exchange. The IRS has also noted that if you mistakenly buy an off-exchange plan thinking it’s eligible, it will still be accepted for HSA use.
The IRS has also adjusted previous guidelines related to the Indian Health Service (IHS). Receiving treatment at an IHS facility previously disqualified individuals from HSA contributions. However, this stipulation no longer applies if enrolled in a Bronze reduced-cost plan designed for certain indigenous populations, meaning treatment at an IHS facility won’t affect HSA eligibility.
Direct Primary Care Service Arrangements
A Direct Primary Care Services Arrangement (DPCSA) involves a fixed monthly fee paid directly to a primary care provider for services rendered. This model doesn’t involve insurance claims or co-payments.
Initially, such arrangements raised concerns regarding HSA eligibility. However, the IRS has clarified that a qualified DPCSA isn’t regarded as health insurance for HSA purposes. This means you can still contribute to an HSA while engaging in a DPC arrangement, provided certain conditions are met. For instance, services must be primarily for primary care, and total fees cannot surpass $150 monthly ($300 for multi-person plans), with allowances for inflation starting in 2027.
Since a DPCSA does not count as insurance, you can only get reimbursed for out-of-pocket expenses through your HSA. Payments made by your employer or through a cafeteria plan won’t be eligible.
If monthly DPCSA fees exceed the limit, contributions to your HSA that month won’t be available, but your charges will still qualify as a medical expense. Keeping thorough records is critical here.
Where to Find More Guidance
The IRS has issued Notification 2026-5, outlining the new tax advantages for HSA participants under OBBBA. These revisions will increase HSA eligibility and allow a broader base of individuals to save and manage healthcare costs tax-free.
Upcoming Points for Taxpayers
The IRS is inviting public feedback on this notice until March 6, 2026. Comments can be submitted online, or you may also choose to send documents to the IRS by mail.
Stay tuned for more updates regarding OBBBA.
