Be honest, did you have clients participating in HSAs and accessing telemedicine services before they reached their deductible? How about seeing a direct primary care provider? It's OK, I promise not to call the IRS on you. Better still, you will finally be able to sleep soundly at night.
Perhaps only a very small percentage of the population lies awake at night worrying about the high-deductible health plan/health savings account compatibility rules. However, these rules have posed some thorny issues over the years that have finally been resolved in ways that many of us agree just make sense. So, what exactly has been fixed by the One Big Beautiful Bill Act?
Telehealth
Individuals must participate in qualified high-deductible health plans (HDHPs) to participate in a health savings account. This generally means they can't receive health care coverage at no cost to them before hitting their deductible, and it eliminates the ability to provide "free" telemedicine benefits under an HSA-compatible plan. During the COVID-19 pandemic, this rule was waived for telemedicine because, of course, Congress wished to do everything it could to encourage the use of telemedicine. Such waivers were periodically extended through the end of 2024. As of January 1, 2025, offering free telemedicine was once again "disqualifying" coverage for an HSA — as I said, I won't tell if you won't…
And now the first piece of good news: finally a permanent fix. Effective retroactively to January 1, 2025, coverage for "telehealth and other remote care services."
Direct Primary Care
Next up on the list of problems related to HSA compatibility rules is direct primary care (DPC). For this purpose, one of the issues is the same: If a participant is seeing a DPC provider, they are getting "free" health care before hitting their deductible under HDHP. A second related issue is whether amounts paid for DPC services are considered tax-deductible medical services under the Internal Revenue Code — the answer used to be probably not. The new statute has resolved this question for HSA participants.
Effective January 1, 2026, direct primary care arrangements CAN be offered along with HSAs. At least those arrangements with a value of up to up to $150/month for an individual (or $300/month for a family), —which is fine as long as you don’t live anywhere too expensive…
For this purpose, direct primary care:
- Consists solely of primary care services provided by primary care practitioners if the sole compensation for such care is a fixed periodic fee; and
- Does NOT include:
- Procedures that require the use of general anesthesia,
- Prescription drugs (other than vaccines), or
- Lab services not typically provided in an office setting.
Dependent Care Assistance Program Annual Limits
Congress created the Dependent Care Assistance Programs in 1986. According to my friend ChatGPT, citing U.S. Census data, the average weekly cost of childcare was approximately $47 per child or $2,450 per year — $6,800 in 2025 dollars adjusted for inflation. This makes the program's annual limit of $5,000 per family feel reasonable. However, the program had no inflationary adjustment and stayed at $5,000 for nearly 40 years. As any parent who ever used a DCAP can tell you, the $5,000 didn't get you very far.
ChatGPT tells me that today's national average for full-time center-based care for one child is $11,000- $15,000 per year. That's about $210-$290/week. If you live in a major city, I'm sorry. I won't bother to tell you; you already know.
In any case, the One Big Beautiful Bill Act, finally adjusts the limit on DCAPs, from $5,000 to $7,500/year for joint filers. It's certainly an improvement. Working parents will likely be grateful; but we can also forgive them if they are not dancing in the streets. (Incidentally, it's STILL not indexed for inflation.)
More to come?
More legislation is yet to come in 2025. Congress must act by September 30, 2025 to fund the government and prevent a shutdown. This often becomes an opportunity for benefits-related provisions not dissimilar to those discussed here to find their way into law. So, we watch and wait — and with the ACA's individual subsidies expiring at the end of the year, no matter what, we will undoubtedly have a lot to talk about.
Correction: A previous version of this article incorrectly stated the details of Section 213 of the Internal Revenue Code under the new law. Under the new law, direct primary care will become a newly eligible expense only for individuals with health savings accounts under Sec. 223 of the Internal Revenue Code, but not Sec. 213(d) which applies to a broader group of U.S. taxpayers.
Jennifer Spiegel Berman, JD MBA is the Chief Legal Officer at Lumelight.
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