The One Big Beautiful Bill Act signed into law by President Trump on July 4, 2025 includes several provisions that
Earlier versions of the bill considered a cap on the annual tax exclusion for employer-provided benefits — an idea that did not make it into the final version, thus preserving the existing tax-advantaged status of
Another bright spot involves telehealth integration. During pandemic lockdowns, telehealth options became more attractive to many and proved their worth as a cost-efficient alternative to in-person medical care for many purposes. That cost efficiency led many employers to encourage the use of
But if the reduced cost was below the high-deductible health plan (HDHP) minimums — and if the visit was not for preventive purposes — it would invalidate a participant from funding a health savings account (HSA). Congress passed a temporary fix to that which expired before 2025, permitting telehealth to be provided at a reduced cost or free to the plan participant without invalidating the HSA contributions. That fix has now been made permanent and retroactive to January 1, 2025.
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It does not, however, mean that telehealth is an option for employees who are not eligible for or not enrolled in an employer group medical plan. Most telehealth plans would not meet the requirements to be qualified health plans under the Public Health Services Act, which has a penalty of $100 a day for each individual who has access to a nonqualifying plan.
Many employers would like to open up the telehealth option to part-time employees or others who are not covered by their major medical plans. So far, Congress has not decided to fix this glitch. So, unless the telehealth option is paired with coverage under the major medical plan, it could lead to major penalties if audited.
Another notable change is that bronze and silver plans qualify as HDHPs. Current law would not have permitted many bronze and silver Affordable Care Act (ACA) exchange plans to meet the HDHP requirements, thereby making those participants ineligible for HSAs. Starting in 2026, however, small employers and individuals with such ACA exchange coverage will be permitted to make valid HSA contributions. Employers also could make contributions to those individuals even if they are not covered by the employer-provided medical plan.
Direct primary care also benefits. These arrangements were characterized by the IRS as additional insurance arrangements. They look like the concierge model that some practitioners have moved to where the individual pays the physician a set amount each year and has more robust access to the physician. OBBBA permits this type of arrangement alongside a conventional HDHP and still allows the individual to fund the HSA (despite the ability to obtain some medical services with no additional out-of-pocket costs).
However, the services that can be offered are limited and cannot include any that require general anesthesia, prescription drugs other than vaccines or laboratory services that are not typically administered in an ambulatory setting. Employers may want to wait and see how those rules are explained before moving forward on this expansion.
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Here are a few honorable mentions worth noting:
- The tax exclusion of the bicycle commuting reimbursement from the Qualified Transportation Fringe Benefit was reversed retroactively to January 2025. That permits employers to reimburse $20 a month to employees who commute to work by bike only on a taxable basis.
- A COVID era temporary option for employers to permit the use of their educational assistance programs under IRC Section 127 was made permanent. That means that employers can permit the use of the educational assistance programs to permit tax-free repayments from employees of up to $5250 annually. Prior to the change during COVID, the 127 plans were limited to current educational expense reimbursements. This will take effect starting in 2026.
- OBBBA permanently extended the Paid Family Leave Credit, which has been expanded to permit payment of PFL insurance premiums. It is now available in all states and lowers the work requirement (at the discretion of the employer) from one year to six months. The credit (up to 25% of the amount paid) is provided to employers who have a written policy, provide at least two weeks of PFML annually, and pay at least 50% of normal wages to employees on PFML.
- The Enhanced Child Care Credit provides an increased credit of 40% (50% for small businesses, gross receipts of less than $25,000,000 over a 5-year window) of qualified child care expenses up to $500,000 annually ($600,000 for small businesses) for employers who offer payment of childcare expenses.
- Employers can contribute up to $2,500 to so-called Trump Accounts for employees or their dependents as part of a separate written plan maintained by the employer.
- One consequential change in the final bill is the reduction in federal Medicaid funding — nearly a trillion dollars over the next decade. Employers with large numbers of low-wage or part-time employees may see increased pressure to offer alternative health coverage.
- The bill also enacted significant policy changes to the health insurance marketplaces, reducing federal subsidies and tightening eligibility, which means some employees who previously relied on marketplace coverage will have to seek employer-sponsored insurance or go uninsured. This could increase demand for employer health plans, especially among lower-income workers.
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The final OBBBA has several provisions that directly and indirectly enhance employer-provided health and welfare benefits. In addition, several other provisions may encourage more participation in those benefits. It preserves the tax-advantaged status of employer health benefits, introduces new tax exemptions for tip and overtime income and enacts restrictions on Medicaid and ACA exchange subsidies that will likely increase the importance of employer-sponsored health coverage. Employers should prepare for increased demand for benefits and communicate these changes to their workforce as the law takes effect.
