S. 276 — Personalized Care Act of 2025

This section revises the eligibility requirements for health savings accounts (HSAs) to include, for taxable years beginning after December 31, 2025, any individual covered under a group or individual health plan; health insurance coverage, including short-term limited duration plans or medical indemnity plans; specified government programs (i.e., Medicare Parts A or B, Medicaid, CHIP or qualified CHIP look-alikes, TRICARE, VA health care programs as determined by the Secretary of Veterans Affairs, Indian Health Service or tribal programs, or FEHB); or participating in a health care sharing ministry. (Previously, eligibility required coverage under a high-deductible health plan without disqualifying coverage such as Medicare; this section strikes those restrictions and makes conforming amendments throughout the Internal Revenue Code.)

This section increases the annual contribution limits for Health Savings Accounts (HSAs)—tax-advantaged savings vehicles for individuals with high-deductible health plans—to $10,800 for self-only coverage (from $2,250) and $29,500 for family coverage (from $4,500) for taxable years beginning after December 31, 2025. It further modifies the cost-of-living adjustment for these limits by applying it for taxable years beginning after 2026 and basing it on calendar year 2025 (previously, calendar year 1997).

This section expands the definition of qualified medical expenses under health savings accounts (HSAs)—tax-advantaged savings vehicles for individuals enrolled in high-deductible health plans (HDHPs)—to permit tax-free distributions for premiums of HDHPs (previously ineligible except in limited cases such as COBRA continuation coverage or long-term care insurance). The change applies to taxable years beginning after December 31, 2025.

This section includes in qualified medical expenses for Health Savings Accounts (HSAs) (i) periodic fees paid to a physician for a defined set of medical services or the right to receive medical services on an as-needed basis, and (ii) amounts prepaid for medical services designed to screen for, diagnose, cure, mitigate, treat, or prevent disease and promote wellness. It further provides that arrangements offering medical services in exchange for a fixed periodic fee shall not be treated as health insurance for purposes of HSA eligibility. The amendments apply to taxable years beginning after December 31, 2025.

This section expands the definition of medical care under the medical expense deduction (IRC §213(d)) to include periodic fees paid for a defined set of medical services provided on an as-needed basis (i.e., direct primary care or concierge medicine arrangements). The change applies to taxable years beginning after December 31, 2025.

This section reduces the penalty tax on nonqualified distributions from health savings accounts (HSAs)—i.e., amounts withdrawn for nonqualified medical expenses—to 10% (from 20%) for taxable years beginning after December 31, 2025.

This section amends the Health Savings Account (HSA) rules to (1) include amounts paid by HSA holders who are members of a health care sharing ministry (HCSM)—defined in IRC §5000A(d)(2)(B)(ii) without regard to subclause (IV)—for sharing medical expenses among members and administrative fees as qualified medical expenses under IRC §223(d)(2), and (2) provide that an HCSM is not treated as a health plan or insurance for tax purposes under IRC §223(c). (Thus, HSA holders may use tax-free distributions for HCSM costs, and HCSM membership does not disqualify HSA eligibility.) The changes apply to taxable years beginning after December 31, 2025.

This section provides that amounts paid for membership in a health care sharing ministry (as defined in IRC §5000A(d)(2)(B)(ii), disregarding subclause (IV)) are treated as amounts paid for medical care for purposes of the medical expense deduction under IRC §213(d). The provision applies to taxable years beginning after December 31, 2025. (Thus, qualifying membership fees become deductible as itemized medical expenses, subject to the 7.5% of adjusted gross income floor.)