This bill creates a new direct primary care service arrangement (DPC) category under the Internal Revenue Code and clarifies that DPCs are not health plans for health savings account (HSA) purposes. It also treats DPC fees as medical expenses, imposes a monthly cap on fees, and requires W-2 reporting for employer-linked DPC arrangements.
The measures would take effect for months beginning after December 31, 2025, with inflation adjustments to follow and forthcoming regulatory guidance to implement the framework.
At a Glance
What It Does
The bill adds a new subparagraph to IRC 223 to define direct primary care service arrangements and clarifies they are not health plans for HSA purposes. It sets a fixed monthly fee concept, caps total monthly charges, and excludes certain services from counting as primary care services. It also expands the medical-expense treatment for DPC fees, adds W-2 reporting, and updates inflation adjustments.
Who It Affects
Individuals enrolled in or considering DPC arrangements, employers that offer DPC as a benefit, direct primary care providers, and HSA administrators/trustees.
Why It Matters
This creates tax-advantaged clarity for DPC models, potentially broadening HSA-eligible care while introducing concrete caps and reporting requirements that affect how care is priced and reported.
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What This Bill Actually Does
The bill introduces a new category called direct primary care service arrangements (DPCs). Under this framework, DPCs are explicitly not treated as health plans for the purpose of health savings accounts.
The arrangement hinges on a fixed periodic fee for primary care services provided by PCPs, and it imposes a per-person monthly cap on these fees (with a higher cap if the arrangement covers more than one individual). Several services are excluded from being counted as primary care services, including procedures requiring general anesthesia, most prescription drugs (except vaccines), and certain laboratory services.
The Secretary of Health and Human Services will issue regulations to guide how these exclusions are applied.
In addition, the bill would treat DPC arrangement fees as medical expenses for purposes of Section 223(d)(2)(C), expanding the set of costs HSAs can cover. For employment-based DPC arrangements, the bill adds a reporting requirement on Form W-2 to capture the aggregate DPC fees for each employee.
The inflation-adjustment provisions in the tax code are amended to accommodate these new rules, and the changes become effective for months beginning after December 31, 2025, with the relevant amounts adjusted over time. Regulatory guidance will follow to operationalize the framework.
The Five Things You Need to Know
The bill creates a new direct primary care service arrangement category and clarifies it is not a health plan for HSA purposes.
DPC fees are capped at $150 per person per month, with a higher cap for multi-person arrangements.
Certain primary care services are excluded from the DPC definition, including anesthesia procedures, most prescription drugs, and certain lab services.
DPC arrangement fees can be treated as medical expenses for HSAs, and employers must report DPC fees on employees’ W-2 forms.
The amendments include inflation adjustments and other regulatory guidance, with an effective date for months after December 31, 2025.
Section-by-Section Breakdown
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Short title
Section 1 establishes the act’s official name, the Primary Care Enhancement Act of 2025, and notes its purpose to amend the Internal Revenue Code to address direct primary care arrangements and HSA eligibility.
Definition and scope of direct primary care arrangements
Section 2(a) adds a new subparagraph to define a direct primary care service arrangement and specifies that such arrangements are not health plans for purposes of HSA eligibility. The arrangement is characterized by medical care from primary care practitioners provided for a fixed periodic fee, with a cap to limit overall fees per month.
Fee cap and coverage rules
The bill sets a monthly cap of $150 per individual for direct primary care service arrangements, with the cap rising to $300 if the arrangement covers more than one individual. This creates a per-month ceiling intended to maintain affordability while keeping the arrangement distinct from traditional health plans.
Exclusions from primary care services
Certain services are expressly excluded from being counted as primary care services for DPC purposes, including procedures requiring general anesthesia, most prescription drugs (except vaccines), and laboratory services not typically administered in ambulatory primary care settings. The Secretary, after consultation with HHS, will issue guidance on applying these exclusions.
DPC fees treated as medical expenses
Section 223(d)(2)(C) is amended to add a new clause allowing DPC arrangement fees to be treated as medical expenses, broadening the set of costs that HSAs can cover under existing tax rules.
Inflation adjustment
The inflation adjustment provisions in 223(g)(1) are amended to accommodate the DPC framework, updating how the applicable cap and related thresholds are adjusted for calendar years after 2025.
W-2 reporting for DPC arrangements
Section 6051(a) is amended to add a new paragraph requiring reporting of aggregate DPC arrangement fees on the W-2, in cases where the arrangement is provided in connection with employment, thereby enhancing employer reporting and IRS visibility.
Effective date
The amendments apply to months beginning after December 31, 2025, and to taxable years ending after that date, with transitional rules to be implemented consistent with IRS regulations.
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Explore Finance in Codify Search →Who Benefits and Who Bears the Cost
Every bill creates winners and losers. Here's who stands to gain and who bears the cost.
Who Benefits
- Employees who enroll in DPC arrangements can access tax-advantaged primary care funding through HSAs without these services being counted as traditional health plans.
- Direct primary care providers gain clearer market positioning and a defined payer framework for fixed-fee services.
- HSAs holders gain expanded eligibility for covering DPC fees as medical expenses under 223(d)(2)(C).
- Employers offering DPC as a benefit may benefit from a clearer, tax-advantaged health-care option and a formalized reporting structure.
Who Bears the Cost
- Regulatory bodies (IRS/Treasury and HHS) will bear implementation and ongoing regulatory costs to issue guidance and monitor compliance.
- Employers may incur administrative costs to track DPC fees and report them on W-2 forms.
- Direct primary care practices could face new recordkeeping and compliance requirements that add administrative burden.
- HSAs and their custodians may face complex reconciliation tasks to ensure DPC fees are properly treated as medical expenses under changing rules.
Key Issues
The Core Tension
The central dilemma is balancing tax-advantaged access to fixed-fee primary care against preserving appropriate coverage boundaries and risk pooling: should DPC be allowed to substitute for health plans for HSAs, and at what point do pricing caps or exclusions undermine access to comprehensive care?
This proposal seats direct primary care arrangements within the tax code framework, but it raises questions about enforcement, oversight, and the precise boundary between a healthcare provider model and traditional health insurance. The line between DPC and a health plan hinges on whether the arrangement can truly function as care delivered for a fixed fee with minimal additional coverage.
Implementation will require clear regulatory definitions to avoid circumvention of traditional insurance protections, and to prevent potential gaps in coverage for more comprehensive services. The cap, while intended to maintain affordability, could inadvertently push patients toward higher-cost care outside DPC channels if not calibrated correctly.
The reporting requirements will also demand robust data handling from employers and payroll systems, and the long-term budgetary impact will depend on how many individuals and employers adopt DPC strategies versus conventional coverage.
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