The “One Big Beautiful Bill Act,” or H.R. 1, passed the U.S. House of Representatives by a narrow margin of 217-212. It now heads to the Senate for consideration. The bill includes provisions related to tax cuts, small business incentives, and policy changes impacting group health plans.
Part 3, Investing in the Health of American Families and Workers, is part of a broader federal healthcare reform package aimed at modernizing and expanding access to consumer-directed health benefits, particularly health savings accounts (HSAs) and health reimbursement arrangements (HRAs). This part of the bill introduces tax and regulatory changes intended to give families, workers, and small businesses more flexible and affordable healthcare financing options.
CHOICE Arrangements (formerly ICHRAs)
- Reinforces a 2019 rule that lets employers offer HRAs that workers can use to buy individual health insurance. These arrangements are to be renamed CHOICE (Custom Health Option and Individual Care Expense) arrangements.
- Employees enrolled in a CHOICE arrangement will be able to use salary reduction (through a cafeteria plan) to purchase insurance on the health insurance exchange.
- Small businesses (fewer than 50 employees) offering CHOICE arrangements for the first time will be able to claim a two-year tax credit.
Medicare and HSA Contributions
- People who qualify for Medicare Part A due to age but are not enrolled in Part B will be allowed to contribute to an HSA—something currently disallowed.
Direct Primary Care (DPC) and HSAs
- DPC arrangements (where patients pay a flat fee for primary care) will not disqualify someone from contributing to an HSA.
- Coverage will be limited to basic primary care and cost will be capped at $150/month for an individual and $300/month for families, adjusted for inflation.
Expanded HDHP Compatibility
- Bronze and catastrophic plans sold on health exchanges will qualify as high-deductible health plans (HDHPs), making HSA pairing easier.
On-Site Clinics and HSAs
- Codifies that employer-provided on-site clinics will not prevent HSA eligibility.
- Qualifying services will include physicals, immunizations, injury treatment, and chronic condition care.
Fitness and Exercise Expenses
- Certain fitness-related costs such as gym memberships and exercise classes will be HSA-eligible.
- Annual limits will be $500 for singles and $1,000 for families, adjusted for inflation.
- Exclusions will apply to clubs focused on golf, hunting, sailing, and similar purposes.
Joint Catch-Up Contributions for Couples
- Married couples will be able to combine their HSA catch-up contributions into one account if both are over 55 and have family HDHP coverage.
FSA/HRA Rollovers into HSAs
- Employees can convert unused flexible spending account (FSA) or HRA funds into an HSA contribution when switching to an HDHP.
- Contributions will be capped at the annual FSA limit ($3,300 in 2025).
- Eligibility requires a four-year HDHP-free period prior to this transition.
Retroactive HSA Reimbursements
- HSAs will be able to cover medical expenses incurred up to 60 days before the account was established, if tied to the start of HDHP enrollment.
Spousal FSA Disregard for HSA Eligibility
- An individual’s eligibility to contribute to an HSA will not be impacted by their spouse’s FSA, if the FSA is only reimbursing the spouse’s expenses.
Doubling HSA Contribution Limits (with Income Phase-Out)
- HSA contribution limits in 2025 for eligible individuals will be increased from $4,300 to $8,600 for self-only coverage, and from $8,550 to $17,100 for family coverage.
- Eligibility phases out for individuals with $100,000 in annual income and families with $200,000 in annual income.
- Applies only to employee contributions.
Regulatory Authority
- Grants the Secretaries of the Treasury and Department of Health and Human Services the authority to issue rules and guidance as needed to implement this part of the bill.