An Analysis of Healthcare Provisions in the One Big Beautiful Bill Act (2025)

By: Neil F. Aragones, Sean Craig, Susan C. Hughes, Peter C. Miller, Rosann Torres, and Charles R. Zubrzycki, Practical Guidance

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The text discusses several healthcare-related tax and insurance reforms contained in the One Big Beautiful Bill Act (2025) and related proposals. First, it explains the expansion of the definition of a High Deductible Health Plan (HDHP) under IRC §223 to include Affordable Care Act (ACA) bronze and catastrophic plans beginning in 2026. Previously, these plans—though featuring high deductibles—did not technically qualify as HDHPs, excluding many ACA marketplace enrollees from Health Savings Account (HSA) eligibility. The amendment harmonizes the tax code with ACA plan structures and is expected to increase HSA access, though concerns persist that expanded eligibility may exacerbate underinsurance for lower-income populations.

The text then reviews proposed—but ultimately not enacted—changes to Individual Coverage Health Reimbursement Arrangements (ICHRAs). Earlier drafts of the Act would have codified ICHRAs under the new name CHOICE Arrangements, provided small employers with greater flexibility to offer CHOICE and group plans concurrently, allowed employees to use pre-tax cafeteria plan dollars to pay Exchange premiums in coordination with CHOICE, eased administrative notice requirements, and granted temporary tax credits to encourage adoption. Although these provisions were not enacted, the analysis highlights how they were designed to reduce employer administrative burden, integrate more smoothly with the ACA marketplace, and expand benefit design flexibility while also posing potential equity and regulatory compliance challenges.
The text situates these CHOICE proposals within the Senate’s historically constrained approach to HSA eligibility. The Senate has long limited HSAs to individuals enrolled in tightly defined HDHPs and resisted broader integration with ACA marketplace coverage or pre-tax premium payment structures. Even the proposed CHOICE reforms, though more flexible than existing rules, adhered to these guardrails by not automatically expanding HSA eligibility, preserving class-based distinctions for large employers, limiting cafeteria plan use, and confining tax incentives to small employers. This reflects the Senate’s incrementalist philosophy toward expanding HSAs and HRAs while maintaining fiscal discipline and risk-segmentation rules.

Another major change addressed in the text is the permanent extension of the safe harbor allowing HDHPs to cover telehealth services before the deductible without losing HSA compatibility. This relief, initially temporary during the COVID-19 pandemic, is now codified and broadly applicable, enabling HDHPs to offer pre-deductible telehealth for any condition. The amendment is intended to improve access, particularly in rural and underserved areas, and to support modern care delivery models, though some critics argue that expanded pre-deductible coverage could weaken the cost-conscious structure of HDHPs.

Finally, the text summarizes reforms related to Direct Primary Care (DPC) arrangements. Under the Act, DPC memberships are no longer considered disqualifying health coverage for HSA purposes, provided they consist solely of primary care services and charge a fixed monthly fee capped at $150 per individual or $300 per family. The Act also designates DPC fees as qualified medical expenses payable with HSA funds and provides for inflation adjustments beginning in 2027. These changes remove longstanding uncertainties that prevented many individuals from combining DPC models with HSAs, thereby supporting more preventive, patient-centered care options. Together, the reforms reflect an effort to modernize tax rules governing healthcare arrangements, reduce structural mismatches with insurance markets, and promote innovative care models while maintaining protections central to federal health policy.