On May 22, 2025, the House of Representatives passed the “One Big Beautiful Bill Act” to implement President Trump’s agenda as part of the budget reconciliation process. In addition to the bill’s numerous tax provisions, the legislation includes a large number of sweeping changes to the rules governing tax-advantaged savings accounts, Medicaid, PBM transparency, and Medicare. However, the bill is still in the early stages of the legislative process, and these provisions could change significantly in the Senate and before the legislation is signed into law.
The bill includes a number of new proposals regarding HSAs, which are individually owned savings and investment bank accounts that can be used to pay for the qualified medical expenses of account holders, their spouses, and their tax dependents. Under existing law, there are several restrictions on HSA eligibility, including being covered by a qualified HDHP and not having “impermissible coverage,” which is any other coverage that pays toward the HDHP plan deductible. Impermissible coverage also includes a general purpose HRA or health FSA or enrollment in Medicare Part A. However, the legislation would allow individuals who are eligible for Medicare Part A but enrolled in an HDHP to continue contributing to an HSA.
In addition, the bill would relax HSA eligibility for those individuals who might be enrolled in a direct primary care service arrangement or an onsite employee medical clinic, which under current law could make someone ineligible to contribute to an HSA. The legislation would also allow individuals to be eligible for an HSA even if an individual’s spouse is enrolled in an FSA. The bill would also modify the rules that would allow a rollover from a terminated FSA or HRA into an HSA. There would also be an increase in HSA contribution limits by $4,300 for HSA-eligible individuals with single-only coverage and by $8,550 for individuals with family coverage. Furthermore, the bill includes a provision that allows HSA money to be used for “qualified sports and fitness expenses” up to certain limits. This could include things like gym memberships or fees and participation or instruction in physical exercise or a physical activity. The sports and fitness expenses limit would be $500 for single coverage and $1000 for all others.
Beyond the numerous HSA provisions, the bill includes proposed Medicaid spending cuts and provisions related to Medicare Part D PBM transparency. The legislation proposes to codify the Trump Administration’s Final 2019 Regulations permitting Individual Choice Health Reimbursement Arrangements to be used for purchasing qualified health insurance and to rename the policy as the Custom Health Option and Individual Care Expense (CHOICE) arrangements. The CHOICE arrangements would satisfy certain nondiscrimination and ACA requirements, including the ACA requirement that HRAs must be fully integrated with a group health plan. For small employers (non-ALEs), a CHOICE arrangement would include a bonus tax credit based on the number of enrolled employees.
Employer Takeaway
While the proposed changes would generally take effect in 2026, the bill must still undergo further consideration in the Senate, and the proposals could change significantly before the legislation makes its way to the president. Nonetheless, employers should closely monitor legislative developments regarding the act, and should be prepared to take further action when the bill is finally enacted. A copy of the full bill can be accessed here.