A Big, Beautiful Break for HSAs: IRS Guidance on the One Big Beautiful Bill Act’s HSA Provisions

On December 9, 2025, the IRS issued Notice 2026-05, which provides guidance on the HSA provisions in the One Big Beautiful Bill Act (“OBBB”).  (See our prior alert here.)  The Notice provides much-anticipated guidance right before many of these provisions go into effect on January 1, 2026.  However, many questions remain unanswered.  

Telehealth and Remote Care Services

Under the OBBB, an otherwise HSA-eligible individual is eligible to contribute to an HSA if they are covered by a health plan that provides coverage for “telehealth and other remote care services” before the minimum deductible is satisfied (and the individual otherwise meets the requirements to be HSA-eligible).  This is regardless of whether the telehealth and other remote care services are provided outside of, or as part of, the high deductible health plan (“HDHP”). 

• Effective Date – Consistent with the OBBB statutory text, the Notice confirms that this provision applies for plan years beginning on or after January 1, 2025, even if the individual made the HSA contributions and/or was covered by the telehealth and other remote care services arrangement before the OBBB was passed on July 4, 2025. 

• Definition of “Telehealth and Other Remote Care Services” – The OBBB did not define “telehealth and other remote care services.”  The Notice also does not explicitly define what constitutes “telehealth and other remote care services.”  The Notice, however, states that the term includes services listed on the list of telehealth services payable by Medicare that the Department of Health and Human Services (“HHS”) publishes annually under Social Security Act (“SSA”) section 1834(m)(4)(F) (“Annual HHS Permissible Telehealth List”).  For services not included on the Annual HHS Permissible Telehealth List, taxpayers should “apply the principles of [SSA] section 1834(m), its implementing regulations at 42 CFR 410.78, and other guidance issued by HHS defining ‘telehealth services’ and related terms.”  ”  

Significantly, “telehealth and other remote care services” does not include in-person services, medical equipment, or drugs furnished in connection with those services unless they would otherwise be treated as telehealth or other remote care services under the definition above, as set forth in the Notice.

GROOM INSIGHT:  The Notice links to two websites to find the list of services that qualify as “telehealth and other remote care services”: https://www.cms.gov/medicare/coverage/telehealth/list-services and https://www.federalregister.gov/documents/2025/11/05/2025-19787/medicare-and-medicaid-programs-cy-2026-payment-policies-under-the-physician-fee-schedule-and-other#p-573.  The information on these websites is not entirely straightforward and will be difficult for most employers to parse through.  Thus, employers may need to rely on telehealth providers in making the determination of whether the telehealth covers services not included on the HHS list and/or that are not “consistent with the principles of” SSA section 1834(m) and its implementing regulations. Relatedly, while the term “telehealth and other remote care services” was first referenced in the CARES Act as part of COVID-era relief, the term was not previously defined (likely because the temporary nature of the relief).  In the absence of clear guidance, certain telehealth providers may have developed products and services that go beyond the enumerated list of permitted services under the definition set forth in the Notice.  Thus, employers may want to review their telehealth offerings to assess any potential areas for noncompliance with the Notice.

Direct Primary Care Service Arrangements

An individual covered by another “health plan” that is not an HDHP is generally not eligible to contribute to an HSA.  The OBBB provides that a direct primary care service arrangement (“DPCSA”) is not a disqualifying “health plan.”  Thus, an individual may be covered by a DPCSA on a pre-deductible basis without adversely affecting their ability to contribute to an HSA.

The OBBB narrowly defines a DPCSA as an arrangement under which the individual is provided Code section 213(d) medical care consisting solely of primary care services provided by primary care practitioners, where the sole compensation for such care is a fixed periodic fee.  The OBBB limits this fee to $150/month for a DPCSA covering only one individual and $300/month for a DPCSA covering more than one individual. 

GROOM INSIGHT:  If an arrangement fails to satisfy this definition, it is possible that another exception might apply (e.g., under prior IRS Notices for a wellness program, disease management program, employee assistance program, or on-site clinic), but that would require a factual analysis that would only be satisfied if the arrangement does not provide significant benefits in the nature of medical care or only provides preventive care)

• The Fixed Periodic Fee – The Notice provides that the sole compensation for care provided under a DPCSA must be fixed periodic fee.  A DPCSA may bill the fee for periods of more than a month, but no more than a year, provided the aggregate fees are fixed, periodic, and do not exceed the monthly limit (on an annualized basis).  For example, for 2026, the fee for a single individual could be $1,800 for a year, $900 for six months, or $450 for three months. 

A DPCSA does not include an arrangement that provides certain healthcare items and services to individuals on the condition that they are members in the arrangement and have paid a fixed periodic fee, but bills separately for those items and services (through insurance or otherwise).  However, providers participating in the arrangement may offer certain healthcare items and services outside of the arrangement to individuals, regardless of membership in the arrangement, and separately bill both members and non-members for those items and services (through insurance or otherwise). 

GROOM INSIGHT:  Many employers have been curious about whether they could treat part of their onsite clinic as a DPCSA.  Although the distinction above is a bit unclear, it appears that the employer could structure its clinic such that a portion of the clinic offering is a DPCSA, provided that the DPCSA portion of the clinic offering otherwise meets the DPCSA definition, the items and services that the clinic providers provide outside of the DPCSA are available to employees who are not DPCSA members, and the providers bill separately for the items and services.

• Definition of “primary care services” – The OBBB only defined this term by stating that it does not include procedures that require the use of general anesthesia, prescription drugs (other than vaccines), and laboratory services not typically administered in an ambulatory primary care setting.  Congress specifically directed Treasury to issue regulations or other guidance, after consultation with the Secretary of HHS, regarding this definition.  The Notice does not define “primary care services” but states that, although the DPCSA provision defines “primary care practitioners” by reference to SSA section 1833(x)(2)(A), it does not define “primary care services” by reference to the definition at SSA section 1833(x)(2)(B).

GROOM INSIGHT:  It is disappointing that the Notice does not define “primary care services” since the provision is effective in less than a month.  Nonetheless, given that Congress specifically directed Treasury to consult with HHS and issue guidance defining “primary care services,” we expect future guidance may be forthcoming, although the timing of such guidance is unknown.

The Notice provides that an arrangement is not a DPCSA if the arrangement provides services other than primary care services and an individual declines to use such services.  This is because whether an arrangement qualifies as a DPCSA depends on the terms of the arrangement, not the services the individual chooses to use. 

• DPCSA under an HDHP – The Notice makes clear that an HDHP may not pay the fees for, or provide membership in, a DPCSA before the minimum deductible has been satisfied.  Thus, to be provided pre-deductible, the DPCSA must be provided outside the HDHP. 

Also, if an individual is enrolled in both a DPCSA and an HDHP, the HDHP may not count the fees the individual pays for the DPSCA membership toward the HDHP’s minimum annual deductible or out-of-pocket maximum.  This is because an HDHP can only count amounts paid out-of-pocket for services covered by the HDHP toward the deductible and out-of-pocket maximum.

GROOM INSIGHT:  Unlike telehealth, which can be provided both inside or outside the HDHP, the Notice makes clear that a DPCSA can only be provided outside the HDHP.  However, employers generally should be able to “wrap” the HDHP and the DPCSA under a single ERISA plan purposes for purposes of plan document, ERISA-mandated disclosures (e.g., SPDs), and annual reporting (i.e., Form 5500s) requirements.

• HSA Distributions for DPCSA Fees – An HSA is permitted to treat an expense for a DPCSA as incurred on (1) the first day of each month of coverage on a pro rata basis, (2) the first day of the period of coverage, or (3) the date the fees are paid.  Thus, for example, an HSA may immediately reimburse a substantiated fee for a DPCSA that begins on January 1 of that enrollment year, even if the enrolled individuals paid the fee prior to the first day of the enrollment year.

For HSA distribution purposes, there is no specific limit on the amount of the fixed periodic fee as there is for purposes of determining whether a DPCSA is a health plan.  Therefore, DPCSA fees that do not satisfy the monthly dollar limit will be treated as medical expenses reimbursable from an HSA but will disqualify the covered individual from eligibility for making HSA contributions while the individual is enrolled in the DPCSA.

If the employer pays the DPCSA fees, including as employee pre-tax contributions through a cafeteria plan, the fees are not treated as amounts paid for qualified medical expenses that an HSA may reimburse.

Bronze and Catastrophic Plans Treated as HDHPs

Under the OBBB, a bronze or catastrophic plan will be treated as an HDHP if it is “available as individual coverage through an Exchange.”

• HDHP Deductible/MOOP Requirements – The Notice states that a bronze or catastrophic plan that is available as individual coverage through an Exchange is an HDHP, even if the plan does not satisfy the minimum annual deductible requirement or maximum out-of-pocket expenses otherwise required for an HDHP.

• Application to Mirrored Plans – The Notice clarifies that this provision applies to “mirrored plans” – i.e., a bronze plan or catastrophic plan purchased off-Exchange on the individual market where the same plan is available as individual coverage through an Exchange.  This includes plans sold exclusively off-Exchange without a cost-sharing reduction load that are otherwise identical to plans sold on- Exchange with a cost sharing reduction load (“mirrored plans” without “silver loading”) and bronze plans that have an actuarial value greater than 60%.

• Application to Non-Mirrored Plans – The Notice also provides that, in the interest of sound tax administration, because the ability of an individual to determine whether a particular plan is available on an Exchange is limited, the IRS will treat an individual as an HSA-eligible individual if the individual enrolls in a bronze or catastrophic plan that is available as individual coverage on the individual market but not on an Exchange, and the individual has no reason to believe that the bronze or catastrophic plan is not available on an Exchange.

GROOM INSIGHT:  There has been much confusion whether a bronze or catastrophic plan available as individual coverage through an Exchange needed to make any changes to be treated as an HDHP, such as stop covering certain services pre-deductible.  There has also been confusion whether this rule applied only to plans sold on the Exchange or also to mirrored off-exchange plans.  The Notice clarifies both of these points and even provides non-enforcement relief for off-exchange non-mirrored plans.  This should be welcome news to carriers. And, given the practical challenges with enforcing an individual knowledge standard (i.e., regarding whether the individual had no reason to believe the plan was not available on an Exchange), we do not expect rigorous enforcement of this aspect of the rule.

• Plans Purchased with an ICHRA – The Notice makes clear that a bronze or catastrophic plan purchased using an individual coverage health reimbursement arrangement still fits within this exception.  However, the Notice makes clear that, if the ICHRA also provides coverage for non-premium reimbursements on a pre-deductible basis, the ICHRA could constitute other coverage that disqualifies the individual from contributing to an HSA.

• SHOP Coverage – The Notice provides that SHOP coverage does not qualify for the exception since it is not individual coverage. 

• Bronze plans with an actuarial value over 60% – the Notice states that bronze plans described under ACA section 1302(d)(1)(A) (that is, a plan providing a level of coverage that is designed to provide benefits that are actuarially equivalent of 60% percent of the full actuarial value of the benefits that are provided under the plan) are treated as HDHPs under this provision.  However, compliance with other provisions of the ACA may affect the real actuarial value of a bronze plan.  The Notice states that Treasury and the IRS have consulted with HHS and are aware that:

some bronze plan variants may have an actuarial value that exceeds 60% because of factors such as the de minimis variance provided for under ACA section 1302(d)(3) or cost-sharing reductions offered to American Indians and Alaska Natives under section ACA 1402(d).  These plans are still considered bronze plans under ACA section 1302(d)(1)(A) by HHS and are treated as HDHPs under this provision.

• Indian Health Services – Under Notice 2012-14, an individual generally is not an HSA-eligible individual if the individual has received medical services at an Indian Health Services (“IHS”) facility at any time during the previous three months.  Notice 2026-05 clarifies that Notice 2012-14 does not apply to individuals who receive medical services at an IHS facility and enroll in a bronze plan variant with cost-sharing reductions offered to American Indians and Alaska Natives under ACA section 1402(d).  Thus, such individuals may be HSA-eligible individuals even if they have received medical services at an IHS facility during the previous three months.

Conclusion

Although this Notice is helpful as a first step in interpreting the new rules under the OBBBA, it is fortunate that Treasury/IRS has requested comments on this Notice, because there are still many unanswered questions and opportunities for clarity.  Please let us know if you have questions or would like assistance with submitting comments.  The comment period deadline is March 6, 2026.

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