New IRS Guidance Expands Preventive Care Benefits an HSA-Qualifying HDHP Can Provide Before Deductible is Met
On July 17, 2019, the Internal Revenue Service (IRS) issued new guidance that expands the preventive care benefits a high deductible health plan (“HDHP”) can provide before the required minimum deductible is met to include certain medical care services and items used to treat certain chronic conditions. The guidance was issued in response to Executive Order 13877, which, among other things, required the Department of Treasury to issue guidance to expand the ability of individuals with chronic conditions to be able to select HDHP coverage that is both compatible with a health savings account (“HSA”) and that covers low-cost preventive care to help maintain their health status before the HDHP deductible is met.
A HDHP is a health plan that is subject to certain minimum annual deductible and maximum out-of-pocket expense requirements. Generally speaking, individuals who are covered by a HDHP cannot receive any plan benefits until the annual deductible is satisfied (with certain exceptions). To help alleviate some of the expense associated with a high deductible, eligible individuals who are covered by a HDHP may establish an HSA, which may be funded by contributions from the individual, the individual’s employer, or a combination of both. The HSA may then be used to pay for certain qualifying health care expenses on a tax-free basis, including expenses that would otherwise be subject to the HDHP’s deductible.
A HDHP can still qualify as an HSA-qualifying HDHP despite covering certain expenses, such as certain preventive care benefits, before the deductible has been met. In other words, a HDHP can provide certain preventive care benefits to covered individuals before the individual satisfies the deductible. Prior to the issuance of this new guidance, these preventive care benefits generally only included (1) services determined to be preventive care under Medicaid, (2) services determined to be preventive care according to guidance issued by the IRS and the Department of Treasury, and (3) preventive care benefits required to be covered without cost-sharing in accordance with the Patient Protection and Affordable Care Act. Significantly, guidance previously issued by the IRS indicated that preventive care generally does not include any services or benefits intended to treat an existing illness, injury, or condition.
New Guidance Issued by IRS
Under this new guidance, the IRS has determined that certain medical services and items used for the treatment of certain chronic conditions should be classified as preventive care, and can be covered by an HSA-qualifying HDHP before the deductible is satisfied. As of right now, only specific medical services and items for the treatment of the specified chronic conditions enumerated in the appendix to the guidance may be treated as preventive care for the purpose of HDHP coverage. These services and items include, among other things, beta-blockers for the treatment of congestive heart failure or coronary artery disease, glucometers and insulin for the treatment of diabetes, inhaled corticosteroids for the treatment of asthma, and selective serotonin reuptake inhibitors for the treatment of depression. However, the IRS has indicated that it will periodically review the appendix every five to 10 years to determine if the list needs to be expanded.
What This Means for HDHP Sponsors
HDHP sponsors may wish to review their plans and consider whether they want to revise or otherwise expand pre-deductible plan coverage to include some or all of the medical services and items for the treatment of chronic conditions that are listed in the new IRS guidance.