Can Patients Use an HSA for Direct Primary Care? The $150 Rule, Explained

Yes. As of January 1, 2026, a Direct Primary Care arrangement no longer disqualifies a patient from HSA eligibility, and DPC membership fees are a qualified HSA expense at or below $150 per month for one person or $300 per month for a family. Above those amounts, a physician is not in violation of anything. The arrangement returns to the unresolved status DPC occupied for a decade, and the tax position belongs to the patient and their accountant.

That single change ended roughly ten years of ambiguity. Here is what actually changed, what it means for your practice, and the Medicare deadline sitting right next to it that most physicians find out about too late.

Key facts at a glance

HSA limit for DPC fees	$150/month per person, $300/month family
Effective date	January 1, 2026
Excluded from the rule	Prescription drugs other than vaccines; lab services not typically done in ambulatory primary care
Medicare opt-out effective dates	January 1, April 1, July 1, October 1 only
Filing lead time	Minimum 30 days before the effective date
Deadline for a January 1, 2027 opt-out	Approximately December 1, 2026
Opt-out reversal window	90 days, with full refund of membership fees collected

What was the HSA problem before 2026?

The IRS raised two separate objections to direct primary care, and the second one was far more damaging than the first.

Objection one: the agency was not convinced a monthly DPC fee qualified as a medical expense under Section 213(d). Under that reading, patients could not spend HSA dollars at your practice.

Objection two: the agency treated membership in a DPC practice as functionally similar to a health plan, which created a Section 223(c) problem. Under that reading, joining your practice did not just prevent a patient from paying you with HSA funds. It could disqualify them from contributing to an HSA at all.

As Dr. Phil Eskew (DO, JD, MBA) of DPC Frontier puts it on the episode, both arguments were weak, and the IRS never litigated either one. That mattered, because litigation likely would have resolved it in the model's favor. Instead the ambiguity persisted, and ambiguity is precisely what keeps large employers from adopting a benefit.

A 213(d) correction years earlier fixed the problem for HRAs and FSAs. The 223(c) fix, the one that mattered for HSAs, arrived January 1, 2026.

Should I put "HSA eligible" on my website?

No. Write "We accept HSA cards" instead.

The distinction is not cosmetic. Below $150 a month, the rule is clear. Above it, the patient and their accountant take their own tax position, and your practice carries no liability for that decision. You do not have to police whether a card is an HSA card. If it processes, it processes.

That protection disappears the moment you make the promise yourself. Writing "HSA eligible" on your website, in your marketing materials, or in your membership agreement means you have taken a position on someone else's tax return.

"We accept HSA cards" conveys the same practical information to a patient searching for it. You can extend the line to cover HRA and FSA cards as well.

Action item: audit your website this week. If the phrase "HSA eligible" appears anywhere, change it.

How do I get under $150 without cutting my revenue?

The rule requires the fixed periodic fee to be the sole compensation for the care. Several things a DPC practice charges are not compensation for care:

• Enrollment fees. These cover the work performed before care begins, including reviewing years of outside records before a first visit. That is not care, and enrollment fees have always served a second purpose: protecting the practice when a patient joins for a month, uses substantial services, and leaves.

• Unbundled ancillaries. Blood draws, injections, EKGs, in-office procedures, and dispensed medications can be itemized and priced separately, at cost or with a markup.

There is a second reason to unbundle that has nothing to do with the IRS. When you promise to cover a $2 medication inside a fixed monthly fee, you have absorbed price risk on that medication permanently. If tariffs or shortages drive it to $200, that is your problem. Several state insurance commissioners have said explicitly that they dislike bundling for exactly this reason.

Whatever structure you choose, be transparent about it in your contract and your marketing.

What does the HSA rule exclude?

Two carve-outs matter for most practices:

1. Prescription drugs other than vaccines are excluded from the definition of primary care services. Relevant to every dispensing practice.

2. Laboratory services not typically administered in an ambulatory primary care setting are excluded. "Typically" is undefined in the rule.

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The practical guidance from Dr. Eskew is not to overthink scope. Audit your own marketing materials. The overwhelming majority of practices already describe themselves in a way that fits.

When do I have to file to opt out of Medicare?

Medicare opt-outs take effect on only four dates each year: January 1, April 1, July 1, and October 1. Your affidavit must reach your Medicare Administrative Contractor at least 30 days before the date you want.

To be opted out on January 1, 2027, file by approximately December 1, 2026.

That deadline falls three weeks before Christmas, in the middle of Medicare open enrollment, which is exactly when no physician is thinking about paperwork.

The gap nobody warns you about. Between filing and your effective date, you cannot bill Medicare and cannot privately contract yet. You also cannot abandon patients. Most physicians in that window see Medicare patients at no charge. Time your filing so that gap is 30 days rather than three months.

Worked example: a resident finishing June 30 who files July 1 gets an October 1 effective date and a three-month gap. Filing in late August produces the same October 1 date with a 30-day gap.

Confirm it yourself. Opt-out status is public and searchable by physician name. Do not assume your affidavit processed because you mailed it.

The 90-day reversal. You may reverse an opt-out once within 90 days of processing. Doing so invalidates every private contract signed in that window, which means refunding every membership dollar collected.

If I opt out of Medicare, can I still order labs and referrals?

Yes. This is the most consequential misunderstanding in the entire conversation.

Opting out means opting out of Medicare's payment process so you can contract privately with patients. It is not disenrollment and it is not exclusion. You remain credentialed. Medicare still knows who you are, and it pays for labs, imaging, specialist referrals, durable medical equipment, home health, and prescriptions you order, exactly as it would for a fully participating physician.

Exclusion is a separate thing that happens for fraud or certain felony convictions. Licensure renewals and employment contracts often ask whether you have been barred from Medicare participation, and that question is not asking about opt-out status. You will have to explain the difference.

Where can I still work while opted out?

Setting	Generally workable
VA	Yes, including part-time roles with benefits
Indian Health Service	Often yes
Corrections	Yes
Hospice, administrative only	Yes
Precepting	Usually not, the chain typically requires participation
TRICARE	Out of network, TRICARE requires participation
Medicaid	Separate mechanism, ORP or OPR status, prohibited in Kentucky and Colorado

Verify against your own contracts. Watch for agreements that say "participating" when they mean "credentialed."

Does opting out apply to Medicare Advantage?

Yes. Opt-out applies to all Medicare programs nationwide, including Medicare Advantage. You cannot opt out of some programs while participating in others.

Practically, treat a Medicare Advantage plan like any other private insurer. Without a contract, you are out of network. Nearly all Medicare Advantage contracts require full Medicare participation, including for creative arrangements.

Do I need to opt out at all?

Not necessarily, and not yet for most new practices.

The signal to watch is a wait list. Without one, an opt-out means enrolling nobody while you wait out the quarter. Physicians still relying on moonlighting income should be especially careful, because the promise not to bill Medicare takes effect the moment you file.

You are ready when you have a wait list, the practice sustains itself without moonlighting, and you have run the calendar backward from your target date.

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Leave a voicemail at mydpcstory.com/contact with your name, your state, and your question. We play them on My DPC Story: State by State and answer them on future episodes.

The question sitting in the back of your head is sitting in someone else's too.

Next State by State episode: Illinois, timed to the Illinois DPC Summit, October 2 and 3 at NIU Naperville. Subscribe to the My DPC Story newsletter to know when it drops and which state is next.

Educational only. Not legal or tax advice. Dr. Eskew is not your attorney and nothing here creates an attorney-client relationship.