New IRS Notice Allows HSA Funds to Be Used for Direct Primary Care

The Internal Revenue Service (IRS) released Notice 2026-5 which provides guidance on changes to health savings accounts (HSAs) enacted by the One, Big, Beautiful Bill Act (OBBBA). The primary subject of this notice is changes that will allow the use of Health Savings Accounts (HSA) funds to purchase Direct Primary Care arrangements.

Historically, in order to contribute to an HSA, a person must be enrolled in a high-deductible health plan (HDHP) and have no other form of coverage. The IRS has historically considered a Direct Primary Care (DPC) arrangement as more akin to a health plan than payment for discrete services, and so has determined that enrollment in a DPC arrangement disqualifies a person from making HSA contributions. This position also prevented individuals from paying DPC fees with HSA funds.

The OBBBA included language which defines DPC arrangements indicating that they shall not be "treated as a health plan" for the purposes of HSA eligibility. The FAQ section of the IRS guidance further clarifies that DPC fees are reimbursable from an HSA. Accordingly, enrollment in a DPC arrangement no longer disqualifies an individual from making HSA contributions and DPC fees may be paid for with HSA funds.

For purposes of this rule, the term "direct primary care service arrangement" means an arrangement under which an individual is provided primary care services by primary care practitioners if the sole compensation for such care is a fixed periodic fee. "Primary care practitioner" is defined as an individual who is a physician who has a primary specialty designation of family medicine, internal medicine, geriatric medicine, or pediatric medicine, or who is a nurse practitioner, clinical nurse specialist, or physician assistant.

"Primary care services" is defined to exclude (1) procedures that require the use of general anesthesia, (2) prescription drugs other than vaccines (therefore, vaccines are permitted primary care services), and (3) laboratory services not typically administered in an ambulatory primary care setting. The term "direct primary care service arrangement" does not include any arrangement if, with respect to an individual for a month, the aggregate fees exceed $150 (or $300 for any such arrangement that covers more than one individual).

The guidance also touches on a couple of other provisions of OBBA, including:

• Permanently extending the safe harbor which allowed HDHPs to cover telehealth and remote care services without applying the deductible.
• Amending the definition of HDHPs to expressly include Bronze and Catastrophic plans.

The AAFP wants to emphasize its strong support for this new provision and has long called for this change, in line with its DPC advocacy.