Primary Care Enhancement Act of 2025

Bill Number

H.R. 1026

Origin Chamber

House

Congress

119th Congress, Session 1

Policy Area

Taxation

Status

Introduced

Latest Action

2025-02-05: Referred to the House Committee on Ways and Means.

Last Updated

2025-05-05T15:03:49Z

AI-Generated Summary

Purpose

The Primary Care Enhancement Act of 2025 aims to update tax rules related to health savings accounts (HSAs), which are tax-advantaged savings plans for medical expenses. Specifically, it ensures that people who use "direct primary care service arrangements" (a membership-style payment for routine doctor visits) can still qualify for and contribute to HSAs without losing eligibility. It also allows these payments to be treated as deductible medical expenses.

Key Provisions

• Definition of Direct Primary Care Service Arrangement: This is a contract where an individual pays a fixed monthly fee (capped at $150 per person, or $300 for arrangements covering multiple people like families) for primary care services, such as routine check-ups and basic treatments, provided by primary care doctors or similar practitioners. It excludes services requiring general anesthesia (a numbing drug for surgery), most prescription drugs (except vaccines), and specialized lab tests not done in a typical doctor's office. The U.S. Treasury Secretary, in consultation with the Health and Human Services Secretary, will issue rules to clarify these exclusions.
• HSA Eligibility: These arrangements are explicitly not considered a "health plan" that would disqualify someone from being an "eligible individual" for HSAs under current tax law.
• Treatment as Medical Expenses: Fees paid for these arrangements count as qualified medical expenses, meaning they can be paid from an HSA without taxes or penalties.
• Inflation Adjustment: The $150/$300 fee limits will increase annually for tax years starting after 2026, based on inflation (using 2025 as the base year).
• Reporting Requirements: If an employer provides this arrangement, the total fees paid for an employee must be reported on their W-2 tax form (a document employers send to workers and the IRS summarizing wages and benefits).
• Effective Date: Changes apply to months beginning after December 31, 2025, for tax years ending after that date.

Significant Changes to Existing Law

• Under current Internal Revenue Code rules (Section 223), certain health coverage arrangements can disqualify people from HSAs by treating them as disqualifying health insurance. This bill adds a new exception so direct primary care arrangements no longer count as such coverage.
• It expands the list of qualified medical expenses in HSAs to include these fixed fees, which were previously unclear or ineligible.
• Introduces a new inflation adjustment mechanism for the fee caps and adds W-2 reporting for employer-sponsored arrangements, which did not exist before.
• These amendments clarify ambiguities in tax treatment, reducing potential disputes over whether direct primary care counts as insurance.

Potential Impacts

• On Citizens: Individuals can more easily combine direct primary care (a lower-cost, subscription-like model for everyday health needs) with HSAs, potentially lowering out-of-pocket costs for routine care and encouraging tax-free savings for other medical needs. This may appeal to those seeking alternatives to traditional insurance.
• On Government Agencies: The IRS will need to update forms, guidance, and enforcement for HSA eligibility and W-2 reporting, possibly increasing administrative workload. It could also affect federal tax revenue slightly, as more people qualify for HSA tax benefits (e.g., deductible contributions and tax-free withdrawals).
• On Healthcare Providers: Primary care doctors may see growth in membership-based practices, as patients won't face tax penalties for using them alongside HSAs.
• International Relations: No direct impacts, as this is a domestic tax and health policy matter.

Main Stakeholders Affected

• Individuals and Families: Those using or considering direct primary care, especially self-employed people or those with high-deductible health plans paired with HSAs.
• Primary Care Practitioners: Doctors and clinics offering these fixed-fee services, who benefit from clearer tax rules encouraging patient adoption.
• Employers: Businesses providing these arrangements as benefits, now required to report fees on W-2s, which may simplify or complicate payroll processes.
• Government Entities: The IRS (for tax administration) and Department of Health and Human Services (for guidance on service definitions).
• Health Savings Account Providers: Banks and financial institutions managing HSAs, which may see increased account openings.

Notable Legal, Constitutional, or Political Implications

• Legal: Provides clear statutory guidance to prevent IRS audits or court challenges over whether direct primary care disqualifies HSAs, promoting consistency in tax enforcement. The delegation to the Treasury Secretary for regulations ensures flexibility in implementation without needing new laws.
• Constitutional: No major issues; it aligns with Congress's authority to regulate taxes and commerce under the U.S. Constitution (Article I, Section 8), and does not infringe on individual rights like privacy or free speech.
• Political: Introduced with bipartisan support (sponsors from both major parties), it reflects a push for innovative, patient-centered healthcare models amid debates on affordability. It could influence broader discussions on HSA expansions or alternatives to the Affordable Care Act, but remains narrowly focused on tax treatment without altering insurance mandates.

This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.

Sponsor

Rep. Smucker, Lloyd [R-PA-11]

Cosponsors (8)

Rep. Tenney, Claudia [R-NY-24], Rep. Schneider, Bradley Scott [D-IL-10], Rep. Panetta, Jimmy [D-CA-19], Rep. Crenshaw, Dan [R-TX-2], Rep. Schrier, Kim [D-WA-8], Rep. Kelly, Mike [R-PA-16], Rep. LaHood, Darin [R-IL-16], Rep. Onder, Robert [R-MO-3]

Recent Actions

• 2025-02-05: Referred to the House Committee on Ways and Means.
• 2025-02-05: Introduced in House
• 2025-02-05: Introduced in House

Bill Versions

• Primary Care Enhancement Act of 2025 — issued 2025-02-05 — PDF (5 pages)