The Primary Care Enhancement Act of 2025 amends the Internal Revenue Code to recognize direct primary care (DPC) arrangements as medical care for tax purposes and to ensure those arrangements do not disqualify Health Savings Account (HSA) contributions. The bill adds a narrow definition of DPC, limits the amount treated as medical care, and adds an employer reporting requirement.
This matters for employers, DPC providers, HSA custodians, and tax filers: it creates a tax pathway for routine primary‑care subscription fees to be treated as deductible medical expenses (subject to limits) while preserving HSA eligibility for people who also use DPC services. The measure also builds in a reporting mechanism so employers must show aggregate DPC fees on W‑2s, creating a compliance and payroll reporting touchpoint.
At a Glance
What It Does
The bill adds “direct primary care service arrangements” to the list of medical care in IRC §213(d), defines eligible DPC by provider type and service limits, and caps deductible monthly fees at $150 per individual (with indexing after 2026). It amends HSA rules in §223 to state that DPC arrangements are not treated as disqualifying health coverage and requires employers to report aggregate employee DPC fees on Form W‑2.
Who It Affects
Primary care subscription practices, employers who offer or facilitate DPC, HSA holders and custodians, payroll departments and tax preparers, and IRS compliance units. Insurers and high‑deductible health plan sponsors will see indirect effects on benefit design and coordination.
Why It Matters
The change creates a tax‑favored channel for subscription primary care and removes a key barrier to pairing DPC with HSAs — a combination previously treated as potentially disqualifying HSA coverage. The cap and W‑2 reporting are the bill’s compliance levers; they limit tax exposure and give the IRS visibility into employer‑connected DPC use.
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What This Bill Actually Does
The bill creates a statutory slot for direct primary care within the tax code. It says a DPC arrangement exists when an individual pays a fixed periodic fee solely for primary care services delivered by clinicians who qualify as primary care practitioners under the Social Security Act definition (but the bill drops one clause of that definition).
The legislation excludes high‑intensity procedures that need general anesthesia and most lab work not commonly done in a primary care office; the Treasury must publish guidance on applying these exclusions.
Only a defined portion of DPC fees can count as “medical care” for §213 deductions and for purposes of HSAs. The bill sets that limit at $150 per individual per month (the law treats family coverage differently by allowing twice that amount when one DPC covers multiple people) and instructs Treasury to index the dollar amount after 2026 for inflation, rounded to the nearest $10.To protect HSA eligibility, the bill amends §223 to say that having a DPC arrangement does not make someone ineligible for HSA contributions because the arrangement is neither a disqualifying health plan nor “insurance” for specified HSA provisions.
Employers must report aggregate DPC fees provided in connection with employment on the Form W‑2, giving the IRS a reporting trail. All changes apply to months beginning after December 31, 2025, in taxable years ending after that date.Operationally, employers and DPC providers will need processes to segregate eligible subscription fees, track the number of individuals covered by an arrangement, and produce payroll or year‑end reporting.
HSA custodians and tax preparers will need to accept that DPC fees—within the capped amount—do not automatically undermine HSA eligibility, but they remain responsible for verifying overall HSA qualification criteria.
The Five Things You Need to Know
The bill amends IRC §213(d)(1) to add a new subparagraph treating direct primary care service arrangements as medical care, but only for “eligible fee amounts.”, It defines a direct primary care service arrangement as fixed‑fee primary care delivered by clinicians meeting the Social Security Act’s primary care practitioner definition, and excludes procedures requiring general anesthesia and most non‑ambulatory lab services.
The bill caps eligible monthly fees at $150 per individual (or $300 when one arrangement covers multiple individuals), and instructs Treasury to index that $150 after 2026 and round to the nearest $10.
It amends IRC §223 so DPC arrangements are explicitly not treated as a health plan or as insurance for purposes that would otherwise disqualify HSA contributions.
It requires employers to report aggregate employee DPC fees on Form W‑2 and makes the amendments effective for months beginning after December 31, 2025, in taxable years ending after that date.
Section-by-Section Breakdown
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Adds DPC to deductible medical care
This provision inserts a new subparagraph (E) into §213(d)(1), expressly listing direct primary care service arrangements among items treated as medical care. Mechanically, that makes eligible DPC fees potentially deductible as medical expenses for itemizers and relevant to other tax calculations that reference §213. The impact hinges on the later qualifying rules and fee caps; without those, a blanket inclusion would have been far broader.
Defines DPC and limits eligible fees
The bill creates a statutory definition: a DPC arrangement is a fixed periodic fee arrangement providing only primary care services by clinicians defined under §1833(x)(2)(A) of the Social Security Act, but excluding certain services (general‑anesthesia procedures and labs not typical of ambulatory primary care). It then defines “eligible fee amount” and caps deductible/eligible monthly fees at $150 per individual (double when one arrangement covers more than one person). Treasury must issue guidance on the excluded services and index the cap after 2026, rounding to $10 increments.
Clarifies HSA eligibility when using DPC
This clause tells the code that a DPC arrangement is not a health plan for the HSA high‑deductible requirement (cross‑referencing paragraph (1)(A)(ii)) and is not “insurance” for the specified HSA rule. Practically, it prevents DPC subscriptions—when structured as described—from automatically disqualifying a taxpayer from making deductible HSA contributions. Administrators will need to reconcile this carve‑out with other forms of coverage or employer arrangements that could still disqualify HSAs.
Employers must report aggregate DPC fees on W‑2
The bill adds a requirement that, where a DPC arrangement is provided in connection with employment, employers report the aggregate fees for that employee on Form W‑2. This creates a payroll reporting obligation and gives the IRS a data source for compliance; it also raises questions about how employers will collect fee information from third‑party DPC vendors and how to treat employee‑paid versus employer‑paid subscriptions.
Applies to months after Dec 31, 2025
All amendments apply to months beginning after December 31, 2025, in taxable years ending after that date. That timing means employers, DPC providers, HSA custodians, and payroll vendors will have a limited lead time to change systems and processes once the bill becomes law; it also creates a clear cutoff for determining which subscription fees fall within the new tax treatment.
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Explore Healthcare 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
- Consumers who use DPC: Individuals who subscribe to primary care memberships can treat capped portions of their fees as medical expenses and keep HSA eligibility, lowering their after‑tax cost of routine primary care.
- Direct primary care providers: DPC practices gain clearer tax treatment for subscription fees, making their model more attractive to patients who want tax‑favored care and easier to integrate with employer benefits.
- HSA holders and custodians: HSA account holders can pair HSAs with DPC without automatic disqualification; custodians get clearer statutory guidance for plan eligibility determinations.
- Employers offering DPC as a benefit: Employers can sponsor or facilitate DPC without creating an HSA‑eligibility problem for employees, potentially using DPC as a low‑cost primary care access strategy.
- Tax preparers and payroll vendors: The new W‑2 reporting requirement creates a distinct line item to capture for tax prep and payroll services, which can become a billable compliance task.
Who Bears the Cost
- Employers and payroll processors: They must collect fee data from DPC vendors or employees and add W‑2 reporting capabilities, increasing administrative burden and potential liability for misreporting.
- IRS and Treasury: The agencies must produce guidance on excluded services, index calculations, and enforcement parameters; they also shoulder increased audit and compliance workloads.
- DPC providers with mixed‑service models: Practices that bundle non‑eligible services (e.g., certain labs or procedural care) will need billing and recordkeeping changes to separate eligible fees, raising operational costs.
- HSA administrators: Custodians must update eligibility checks and customer guidance to reflect the carve‑out while ensuring other forms of disqualifying coverage remain enforced.
- Taxpayers near the cap: Individuals paying subscriptions above the cap will get only partial tax benefit, possibly creating confusion and perceived unfairness for those in higher‑cost markets.
Key Issues
The Core Tension
The bill balances two legitimate goals—expanding access to primary care by making subscription fees tax‑favored, and preserving the integrity of HSA and tax preferences by limiting and reporting the benefit—but the mechanisms to protect one goal (a low monthly cap and narrow service exclusions) constrain the other (the financial viability and flexibility of DPC models), leaving policymakers and implementers to choose which priority to emphasize in guidance and enforcement.
The bill solves a practical barrier to pairing DPC with HSAs but leaves several implementation questions unresolved. It delegates to Treasury the task of issuing guidance on what primary‑care services are excluded, yet the statutory exclusions are phrased broadly (general anesthesia and non‑ambulatory labs) and may not map cleanly to the wide range of services offered by modern primary care practices.
That ambiguity will force vendors and employers to operate conservatively until Treasury defines boundaries.
The $150 monthly cap (with a simple doubling rule for multi‑person arrangements) is a blunt instrument. In high‑cost urban markets or practices that offer enhanced access (extended hours, team‑based care), a $150 cap may undercount the economic reality of subscription fees and leave many subscribers with partial or no tax benefit.
Indexing after 2026 helps, but the initial level and rounding rules create path‑dependency. Finally, the W‑2 reporting requirement creates administrative friction: employers will need mechanisms to obtain and validate fee data, and third‑party DPC vendors will likely need contractual and data‑sharing arrangements, raising privacy and payroll integration issues.
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