Primary Care Enhancement Act of 2025
- Sponsor
- Rep. Smucker, Lloyd [R-PA-11]
- Committees
- Ways and Means Committee (primary)
- Last action
- Feb 5, 2025
Bottom line
This bill expands eligibility for Health Savings Accounts to individuals utilizing direct primary care arrangements, aiming to integrate these healthcare models and enhance consumer choice.
What it actually does
This bill amends the Internal Revenue Code of 1986 to permit individuals who are enrolled in direct primary care (DPC) service arrangements to remain eligible for Health Savings Accounts (HSAs). It specifies that DPC arrangements are not considered 'health plans' for HSA eligibility purposes, defines qualifying DPC arrangements with fee limits and service exclusions, and allows DPC fees to be paid using HSA funds. It also mandates inflation adjustments for DPC fee limits and requires employer reporting of DPC fees on W-2 forms.
Proponents argue
Supporters argue this bill promotes patient choice and affordability by allowing individuals to combine the benefits of high-deductible health plans with HSAs for catastrophic coverage, and DPC for routine primary care, without penalty. They contend it reduces administrative burdens, fosters a more direct patient-provider relationship, and makes primary care more accessible and transparently priced.
Opponents contend
Critics might argue that this bill primarily benefits healthier, wealthier individuals who can afford both a high-deductible plan and DPC fees, potentially exacerbating disparities in healthcare access. They may also raise concerns about the potential for DPC arrangements to fragment care or create a two-tiered system where those with greater financial resources gain access to more personalized care options with tax advantages.
The bill is very short and clearly written, making it highly accessible for a reader to understand its provisions and implications in a short amount of time.
Section 2(a), amending IRC Section 223(c)(1)
Direct Primary Care Arrangements Not Considered Health Plans for HSA Eligibility
This provision clarifies that having a direct primary care (DPC) service arrangement will not disqualify an individual from being an 'eligible individual' for a Health Savings Account (HSA). Previously, DPC arrangements could be considered 'other health coverage,' which would make an individual ineligible for an HSA. This change removes that barrier, allowing individuals to simultaneously hold an HSA and a DPC arrangement.
Supporters argue
Supporters argue this provision removes an unnecessary regulatory barrier that prevented individuals from combining the cost-saving benefits of HSAs with the personalized, transparently priced care of DPC, thereby expanding healthcare options and promoting consumer-driven healthcare.
Critics contend
Critics might argue that this change could lead to a proliferation of DPC arrangements that are not adequately regulated or transparent, potentially drawing healthier individuals away from traditional insurance pools and increasing costs for those remaining.
Tradeoffs
This provision balances the desire to expand consumer choice and flexibility in healthcare financing with concerns about potential impacts on traditional insurance markets and equitable access to care.
Section 2(a), amending IRC Section 223(c)(1)(E)(ii) and (iii)
Defining Direct Primary Care and Excluded Services
This provision defines a 'direct primary care service arrangement' as one providing medical care consisting solely of primary care services from primary care practitioners for a fixed periodic fee. It sets a monthly fee limit of $150 (or $300 for family coverage) for an arrangement to qualify. It also explicitly excludes certain services from being considered 'primary care services' for this purpose, such as procedures requiring general anesthesia, most prescription drugs (other than vaccines), and complex laboratory services.
Section 2(b), amending IRC Section 223(d)(2)(C)
Direct Primary Care Fees as Qualified Medical Expenses
This provision explicitly states that fees paid for a direct primary care service arrangement are considered 'medical expenses' for the purpose of Health Savings Account distributions. This means individuals can use funds from their HSA to pay for their DPC membership fees on a tax-free basis, further integrating DPC into the HSA framework.
Section 2(c), amending IRC Section 223(g)(1)
Inflation Adjustment for DPC Fee Limits
This provision mandates that the monthly fee limits for direct primary care service arrangements ($150 for individuals, $300 for family coverage) will be adjusted annually for inflation for taxable years beginning after calendar year 2026. This ensures the limits remain relevant over time and do not become outdated due to economic changes.
Section 2(d), amending IRC Section 6051(a)
Employer Reporting of DPC Fees on W-2
This provision requires employers to report the aggregate fees for direct primary care service arrangements provided in connection with employment on an employee's W-2 form. This ensures transparency and facilitates compliance with the new tax rules regarding DPC arrangements and HSA eligibility.