Can an employee use an HSA to reimburse a direct-primary-care fee that already came out of pay before tax? That is a more useful question than whether a program is simply marketed as HSA-compatible.

Notice 2026-5 provides a specific answer about employer-paid fees, including fees paid through a Section 125 salary-reduction arrangement: they are not the HSA beneficiary’s expenses to reimburse. That answer should not be confused with the separate rules governing eligibility to contribute to an HSA. Notice 2026-5, Q&A 18.

Source, dates, and legal status

The source is Notice 2026-5, Expanded Availability of Health Savings Accounts under the One, Big, Beautiful Bill Act (OBBBA). Treasury and the IRS announced its release on December 9, 2025 in IR-2025-119. It appears in Internal Revenue Bulletin 2026-2, dated January 5, 2026, beginning at page 309. This is an explainer of existing guidance, not a new November 2026 announcement.

The relevant direct-primary-care changes apply to months beginning after December 31, 2025. The notice also covers telehealth and certain bronze and catastrophic plans, which have their own conditions and dates. An IRS notice is published administrative guidance; it is not a Treasury regulation or an approval of a vendor. Notice 2026-5, sections I–III.

What changed, and what still has to qualify

Before the statutory change, participation in a typical direct primary care service arrangement could prevent HSA contributions. Section 223 now disregards certain qualifying arrangements for that purpose. The exception does not eliminate the individual’s other HSA eligibility requirements. IRC §223(c)(1)(A) and (E).

The arrangement must provide only the specified primary care through qualifying practitioners, for a fixed periodic fee as the sole compensation for that care. The definition excludes procedures requiring general anesthesia, prescription drugs other than vaccines, and laboratory services not typically provided in an ambulatory primary care setting. IRC §223(c)(1)(E)(ii)–(iii).

For contribution eligibility, aggregate monthly fees are limited to $150, or $300 where the individual has an arrangement covering more than one person. Those thresholds remain unchanged for 2027. These are not universal prices for medical coverage or general wellness-payment allowances. Rev. Proc. 2026-24, section 3.01(2).

Three questions, not one

The statutory basis is IRC §223(c), (d)(2), and (f). For the employer-paid issue, read Notice 2026-5, Q&A 18.

Pretax payroll and after-tax payment are not interchangeable

Q&A 18 says that employer-paid DPC fees, including fees paid through Section 125 salary reduction, are excluded compensation under Section 106 rather than expenses of the HSA beneficiary. They cannot then support the HSA reimbursement described in that answer. Read Q&A 18.

When an individual pays a qualifying fee personally, an HSA distribution still requires its own analysis. Expenses cannot already be compensated by insurance or otherwise, and the account’s establishment date matters. A mixed-funded bill calls for identifying the individual’s actual unreimbursed share, not assuming that the entire invoice is available a second time. IRC §223(d)(2)(A) and Publication 969, Distributions From an HSA.

A $175 example shows why the distinction matters

Hypothetical: an individual pays $175 a month for a single-person arrangement that otherwise meets the DPC definition. It exceeds the $150 contribution-eligibility threshold. Yet Q&A 20 explains that exceeding that threshold does not itself prevent the fee from qualifying for an HSA distribution; the person is disqualified from making HSA contributions while enrolled. Other distribution conditions still apply. Notice 2026-5, Q&A 20.

This example is not an IRS example and does not describe a named provider. Its purpose is to show why “may contribute” and “may spend existing funds” cannot be reduced to the same yes-or-no answer.

Read the agreement, not just the employee’s usage

Q&A 14 looks to the arrangement’s terms; declining to use an included disqualifying service does not fix the contract. Q&As 11–12 distinguish membership-conditioned separate billing from genuinely separate services offered to members and nonmembers. Q&A 13 permits qualifying fixed fees billed for periods longer than a month, up to a year. None of this creates a monthly medical-visit requirement. Notice 2026-5, Q&As 11–14.

What this does not establish for SIMERP or WIMPER models

An HSA rule for qualifying DPC fees is not an exclusion for every separate cash payment in a benefits package. For payments claimed as Section 105(b) reimbursement, the existing regulation addresses incurred medical expenses and payments available irrespective of expenses. Access, participation, or valuation alone does not resolve that separate payment question. Treasury Regulation §1.105-2.

SIMERPU’s practical review

These are our recommended document requests, not a new IRS-mandated checklist. Ask for the full membership contract and excluded-services schedule; billing terms; the complete fee and funding breakdown; payroll election records; and the explanation of how other health coverage affects HSA eligibility.

For an employer or broker, the useful demonstration is a payment trail: who owes the fee, who pays it, which tax treatment is being claimed, and what prevents the same fee from being reimbursed twice. For a CPA or payroll team, ask which facts the administrator’s conclusion assumes and whether the payroll setup matches those facts.

SIMERPU’s assessment

The opportunity is to offer a clearer benefits explanation, not a broader tax claim. We recommend treating the service contract, HSA eligibility, and each payment as separate review items. A useful presentation should be able to explain when the arrangement works, when it does not, and what changes the answer.

Mardy Gould’s Take

Commentary by Mardy Gould, Co-Founder of SIMERPU.

I would ask the question in plain English: who paid this bill, and why would it be paid again? A benefit can have real value without stretching the tax explanation. Show me the agreement, the funding, and the rule for the specific payment. That is a stronger conversation than asking an employer to trust a label.

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