OBBBA Impact on HSAs
From a tax perspective, a Health Savings Account (HSA) can offer the best of all worlds. Like traditional IRA contributions, HSA contributions are made by the individual with pre-tax dollars. Contributions made by an employer are excluded from income, like with a 401(k) plan. And, distributions are tax- and penalty-free, similar to Roth IRA earnings, if they are used for qualified medical expenses. HSA contributions are only available for those covered by a High Deductible Health Plan (HDHP).
The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, makes some changes to the HSA rules.
The changes include the following:
Telehealth Safe Harbor
The OBBBA permanently extends the rule allowing plans to be considered HDHPs, despite not having a deductible for telehealth services. This provision is effective retroactively to January 1, 2025.
Expanded HSA Eligibility
The OBBBA expands HSA eligibility to include those enrolled in Bronze and Catastrophic plans available on state and federal insurance exchanges under the Affordable Care Act. This provision is effective January 1, 2026.
Direct Primary Care (DPC)
The OBBBA allows individuals with HDHPs to enroll in DPC arrangements (sometimes referred to as “concierge medical care”) while remaining HSA eligible, provided the monthly fee for DPC services does not exceed $150 for individuals or $300 for families (both adjusted for inflation). DPC fees are also considered qualified medical expenses that can be paid with HSA funds. This provision is effective January 1, 2026.
Future Changes Possible
While the impact of OBBBA on HSAs is relatively minor, earlier drafts of the new legislation included much more sweeping changes, such as much higher contribution limits and allowing HSA contributions while on Medicare. Just because these provisions were left out of the final bill does not mean they will be abandoned. It is likely that provisions expanding HSAs will reemerge in future legislative proposals.
By Sarah Brenner, JD
Director of Retirement Education
Ed Slott and Company, LLC
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Christian Cordoba, founder of California Retirement Advisors, has been a member of Ed Slott's Master Elite IRA Advisor Group since 2007.
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