How will HSA-compatible direct primary care work? The IRS explains

But the IRS also showed how the IRS is thinking about an OBBBA provision that will let HSA owners spend up to $150 of HSA assets per individual per month, and up to $300 per family per month, on DPC practice membership fees without violating the requirement that an HSA user combine the HSA with a "high-deductible health plan."

What it means: Consumers who combine HSAs with HDHP coverage and a DPC practice membership will no longer have to worry as much about spending the HSA cash on care for sore throats or bad coughs.

The only big, hard-to-predict spending could be for care for illnesses or injuries that lead to a trip to the hospital or to use of expensive prescription drugs.

HSA theory: The designers of the health savings account program required users to combine the accounts with high-deductible health plan coverage.

One goal was to reduce the premiums for the HDHP coverage, and the size of the federal "tax expenditure" on the cash employers pay for the HDHP coverage.

Employers can deduct spending on health coverage premiums from their taxable income.

The IRS wants to keep the amount of premiums excluded from employers' income as low as possible.

Another reason HSA designers required use of HDHPs is that they wanted consumers to use their own cash to pay for ordinary health care expenses, and especially ordinary sick care expenses, to give those consumers "skin in the game," or a financial incentive to shop for health care services carefully and to avoid getting sick in the first place.

Skin-in-the-game blues: For HSA providers and others, one challenge is that few consumers, or even policymakers, understand the thinking behind the skin-in-the-game requirement.

Medical researchers who do understand the theory behind skin-in-the-game requirements have argued that exposing patients to high out-of-pocket costs often does more harm than good.

Medical researchers contend that high deductibles keep patients with serious chronic conditions such as diabetes from getting routine care that could keep the conditions from leading to serious, expensive, potentially deadly complications, such as stroke, amputations or kidney failure.

Republicans and Democrats in Congress have repeatedly joined to introduce popular, bipartisan bills that would let a patient use HSA-compatible coverage to pay for many types of care before the patient has met the plan deductible.

The new OBBBA DPC practice provision is a major new product of the effort to reduce the amount of skin that HSA users have to put in the health care game.

Direct primary care practices: The IRS called DPC practices "direct primary care service arrangements" in the new notice and defines them as arrangements that "charge a fixed periodic fee and provide for an array of primary care services and items, such as physical examinations, vaccinations, urgent care, laboratory testing, and the diagnosis and treatment of some sicknesses and injuries."

Related: Ensuring that direct primary care providers deliver on their promises

The statutory DPC spending limits will be adjusted for inflation.

The IRS noted that the spending limits apply only to consumers who want to start and contribute to HSAs, not to consumers who want to use existing HSAs to pay for DPC membership fees.

The IRS also said that an HSA-compatible DPC practice:

◆ Can collect the membership fees on any schedule it likes through the course of a year, and an HSA can pay the fee for 2026, for example, before the start of 2026, according to the IRS.

◆ Must charge a set fee for all primary care services it provides; it cannot bill members separately for the services included in the HSA-compatible primary care package.

◆ Can charge a member separately from services that are not included in the primary care package.

◆ Can offer a primary care services package that includes vaccines.

◆ Cannot cover prescription drugs, services that require general anesthesia, laboratory services "not typically administered in an ambulatory primary care setting," or prescription drugs other than vaccines.

A health insurer cannot provide an HSA-compatible DPC practice itself, and an individual cannot turn a practice that provides the wrong services into an HSA-compatible practice by refraining from using the services that fall outside the scope of the IRS DPC practice definition, officials said.

HSA deductibles: For HSA users, one disappointment in the new notice may be how the IRS will treat the relationship between the DPC fees and HDHP deductibles.

Paying for a DPC membership will help a consumer manage routine health care costs, but it will not count toward payment of the HDHP deductible or annual limit on out-of-pocket spending, officials said.

The regulatory machinery: The IRS listed Alexander Krupnick as the notice contact person.

The agency is seeking comments on all aspects of the notice, and comments are due March 6.