GBS Health Plan Compliance
Group Health Plan and ACA Marketplace Provisions in the 2025 Budget Reconciliation Bill
Congress recently passed the sweeping tax and spending budget reconciliation bill titled the “One Big Beautiful Bill Act” (OBBB) which was signed into law on July 4, 2025. The law includes a handful of provisions applicable to group health plans and the ACA Marketplace. The original version of the bill passed by the House on May 22 contained several changes applicable to HSAs and ICHRAs, but most of those items were removed by the Senate during the reconciliation process. The final version of the bill does still include changes related to HSA eligibility and dependent care assistance programs (DCAPs). Here are the highlights.
Telehealth and HSA Eligibility
The OBBB revives the temporary COVID telehealth rule that expired December 31, 2024 which permitted individuals to contribute to an HSA when eligible to receive free or reduced cost telehealth services (even if the visit is not for preventive care) before satisfying the statutory HDHP minimum deductibles. This change is permanent and retroactive to plan years beginning on or after January 1, 2025. Now that this allowance is permanent, plan sponsors no longer need to charge HDHP participants the fair market value for non-preventive telehealth services and participants can receive first-dollar telehealth coverage (before HDHP deductible is met) without jeopardizing HSA eligibility.
Direct Primary Care and HSA Eligibility
Direct primary care (DPC)—a model where patients pay providers a retainer-like fee to obtain certain primary care services—will no longer be considered a disqualifying health plan for HSA purposes effective January 1, 2026. The DPC arrangement may only provide for primary services, not including any procedure requiring general anesthesia, prescription drugs (other than vaccines), or laboratory services not typically administered in an ambulatory primary care setting. The monthly DPC fee cannot exceed $150 for an individual or $300 for family coverage (indexed for inflation). In addition, DPC membership fees will now qualify as an HSA-eligible expense that can be reimbursed from an HSA starting January 1, 2026.
DCAP Limits Increased
For the first time since 1986, Congress has increased the amount parents can contribute to a DCAP (also known as a dependent care FSA). The limits of $5,000 ($2,500 for married but filing separately) will increase to $7,500 and $3,750 respectively, effective beginning January 1, 2026. As with the prior limits, this new limit is not indexed for inflation and will remain at $7,500/$3,750 unless Congress again changes it.
ACA Marketplace Premium Tax Credits
The OBBB made several changes associated with eligibility for premium tax credits (PTCs) for Marketplace individual coverage:
- Beginning in 2026, no PTC eligibility when individuals enroll during Exchange/Marketplace special enrollment periods based on changes to expected household income.
- Beginning in 2026, no limits on Marketplace collections for excess/overpaid “advanced payments” (a version of PTC) made to individuals with household income below 400% of the federal poverty level.
- Beginning in 2026, no PTC eligibility for lawfully present aliens with household incomes of less than 100% of the federal poverty level who are ineligible for Medicaid by reason of alien status.
- Beginning in 2028, must have “specified” immigration status in order to be eligible to receive PTCs.
- Beginning in 2028, eligibility for PTCs and any cost-sharing reductions must be verified by the Marketplace through proof/information provided by the enrollee/individual. Also, passive enrollment (automatic re-enrollment of current plan) is no longer permitted.
Other Changes
The OBBB provides that ACA Marketplace bronze and catastrophic individual coverage plans are to be treated as qualifying HDHPs for HSA purposes beginning in 2026. Also applicable to employers, but not directly related to employer sponsored group health plans: 1) employers sponsoring a Section 127 Educational Assistance Program will be able to continue to provide tax-free student loan repayments (previous rule was set to expire December 31, 2025) up to the indexed statutory maximum (currently $5,250), and 2) bicycle commuting reimbursement has been removed from under the Section 132(f) Transportation Fringe Benefit allowances effective January 1, 2026.
Items NOT Included in the Final OBBB:
As mentioned above, the original version of the bill passed by the House on May 22 contained multiple changes applicable to HSAs and ICHRAs, but those items (other than what is noted above) were not included in the final bill.
For example, the final OBBB does NOT include the following items related to HSAs:
- Allow individuals who are entitled to Medicare Part A by reason of age to contribute to an HSA.
- Allow employers to provide expanded care at on-site medical clinics free of charge to employees enrolled in an HSA-eligible HDHP.
- Allow an employee to contribute to an HSA, even if their spouse has a health FSA.
- Allow HSAs to be used for qualified sports and fitness expenses including gym membership fees.
- Enable new enrollees in a HDHP to convert FSA or HRA balances into an HSA.
- Allow both HSA-eligible spouses aged 55+ to make $1000 catch-up contributions into the same HSA.
- Increase the HSA contribution limits for lower income individuals.
The final OBBB also did NOT include the provision related to ICHRAs (under which employers may contribute to an HRA for individuals who enroll in individual market coverage) that would allow pre-tax cafeteria plan payroll deductions to pay the portion of the premiums for individual coverage not covered by the ICHRA for coverage that is both on and off an Exchange (currently this is only allowed for off-Exchange coverage due to an ACA provision).
Note also, that while the overall cost of the bill had raised some concerns about lawmakers potentially altering the tax incentives for group health plans (e.g., by putting a cap on the tax exclusion for employer-sponsored health insurance) to help pay for the budget bill’s tax and spending policies, the final OBBB did not include any such changes.
Updated December 2024
This document provides an overview of a specific regulatory development. It is not intended to be, and should not be construed as, legal advice for any particular situation.
