IRS Expands HSA Rules to Cover Direct Primary Care Membership Fees

Under Notice 2026-5 (issued December 9, 2025), the IRS expanded Health Savings Account (HSA) eligibility under the “One Big Beautiful Bill Act” (OBBBA).

A Big Win for Patients: How the IRS Is Unlocking HSA Dollars for Direct Primary Care

For years, patients who valued relationship-based primary care — the kind that focuses on preventive health, continuity, and personalised treatment — faced a frustrating financial barrier. If you had a Health Savings Account (HSA) and an interest in a Direct Primary Care (DPC) membership, federal tax rules forced a hard choice: enjoy the tax benefits of your HSA or embrace the proactive care model you wanted. That’s changing in a meaningful way for 2026 — and it’s a win for people who want more from their healthcare dollars and more accessible primary care.

At the end of 2025, the Internal Revenue Service issued new guidance under the One, Big, Beautiful Bill Act (H.R. 1) that reshapes how HSAs and DPC arrangements can work together. Beginning January 1, 2026, the IRS clarified that individuals enrolled in qualifying direct primary care service arrangements can continue contributing to an HSA and even use HSA funds to pay periodic DPC membership fees tax-free. This evolution removes a major roadblock for patients seeking ongoing, personalised care.

What’s Really Different About This Change

Before this update, joining a DPC practice could jeopardise your ability to contribute to an HSA because the federal tax code treated a DPC arrangement as a form of health insurance that disqualified you from HSA eligibility. In addition, even if you did have an HSA, you couldn’t use it to pay for the DPC membership itself — the IRS didn’t consider those periodic retainer-style fees a qualified medical expense.

That’s now changed. Under the updated rules, a DPC service arrangement that meets certain conditions — such as providing only primary care services and charging a fixed periodic fee within IRS limits — is not considered a disqualifying health plan. Most importantly, those periodic membership fees become eligible expenses that can be paid from your HSA on a tax-free basis.

There are some details to keep in mind. The arrangement must truly be limited to primary care services (no general anaesthesia procedures, no prescription drugs other than vaccines, and no specialised lab work outside typical primary care settings) and the monthly fee must stay within the IRS’s defined cap (currently about $150 per month for individual memberships, or $300 for family coverage, indexed for inflation).

Why This Matters for Patients and Providers

It might sound like a technical tax update, but the implications are broader and very real. HSAs have long been prized for their triple tax advantage: contributions are tax-deductible, earnings grow tax-free, and withdrawals for qualified medical expenses cost nothing in income tax. Allowing those tax-favoured dollars to pay for ongoing primary care memberships doesn’t just make DPC more affordable — it aligns financial incentives with better health outcomes.

Traditionally, primary care has been under-resourced in our healthcare system. Episodic care dominated by copays and deductibles tends to incentivise reactive treatment: fix the problem after it occurs rather than prevent it. But DPC emphasises proactive engagement, extended visits, and preventive planning that builds over time. Now, HSA funds can directly support that model instead of being siloed for episodic costs like specialist visits or hospital bills.

For patients, that means they can budget more predictably for the care they want without losing the tax benefits they need. Using tax-advantaged HSA dollars to cover DPC fees reduces the financial friction around preventive care and strengthens the patient-clinician partnership that lies at the heart of better long-term health.

What This Could Mean for the Future of Healthcare

This IRS update reflects a broader shift in how policymakers view primary care and patient choice. By decoupling DPC membership from disqualifying coverage and recognising it as a valid qualified medical expense, the federal government is signalling that innovation in care delivery — especially models that emphasise continuity and prevention — deserves support, not penalty.

For primary care physicians, especially those offering membership-based care, this could make DPC a more viable option for a wider range of patients. Employer benefits packages, insurance brokers, and financial planners are now able to offer DPC to all employees, no longer having to exclude those who select a plan with an HSA.

And for patients, this change removes a long-standing barrier between the care they want and the care they can afford. With proactive, relationship-based primary care now eligible for HSA dollars, the path toward a more personalised and effective healthcare experience just got clearer.