Alert / Employee Benefits
IRS expands HSA-compatible preventive care

IRS expands HSA-compatible preventive care to many common chronic diseases

The Internal Revenue Service has expanded the scope of healthcare services a health savings account (HSA)-compatible high deductible health plan (HDHP) may treat as “preventive care.” The healthcare services are mainly low-cost preventive services for common chronic conditions like diabetes, hypertension, depression and heart disease. The guidance will allow HDHPs to pay for the services before the insured has met the HDHP’s deductible, without disqualifying the employee from making HSA contributions.

Background

While the general idea of an HDHP is to force the insured to satisfy the plan’s high deductible before the plan begins paying benefits, HDHPs are permitted by federal tax rules to pay for preventive care before the high deductible is satisfied. Preventive care for this purpose includes:

  • Services treated as preventive care under specific IRS guidance, such as annual physicals, routine prenatal and well-child care, immunizations, tobacco cessation and obesity weight-loss programs, certain screenings, and wellness programs not supplying significant benefits.
  • Preventive care required by the Affordable Care Act to be paid by the plan without cost-sharing from the insured (e.g., services listed as Category A or B services by the US Preventive Service Task Force, certain immunizations and screenings, and well woman care).
  • Services considered as preventive care under Medicare.

Preventive care for HDHP purposes has not included, as a general rule, treatment of existing illnesses, injuries or conditions. The new guidance creates a limited exception to that general rule.

Lockton comment: The IRS has allowed drugs prescribed even for existing conditions to be considered “preventive” if they prevent the recurrence of a disease from which the insured has recovered or prevent additional complications in an individual who has developed risk factors for a disease. For example, drugs for treating high cholesterol (an existing condition) have been considered “preventive” if they help prevent additional complications, such as a heart attack. But outside of the pharmaceutical context the IRS has resisted calls to treat care of existing diseases or illnesses as preventive.

What’s new?

Under its new guidance the IRS will expressly allow an HDHP to pay for what is typically low-cost treatment of nearly a dozen chronic conditions before the insured has met the high deductible, without jeopardizing the plan’s status as an HSA-compatible HDHP. Beginning July 17, 2019 (we presume this means for claims incurred on or after that date), an HDHP may pay for the following treatments and items below the high deductible:

The IRS took pains to note in its new guidance that the above list is exclusive, and not merely illustrative.  Also, the list of services in the left column is treated as preventive only where prescribed to treat an individual with the associated chronic condition described in the right column and only when prescribed to prevent the exacerbation of the chronic condition or the development of a secondary condition.

Services and items not listed in the chart and prescribed for secondary conditions, or for complications that occur as a result of the chronic condition, are not treated as preventive care for purposes of the HSA rules.

Lockton comment: Sponsors of HDHPs may find this guidance helpful as they prepare for the plan year that begins late this year or in 2020. We half suspect, however, that because the IRS has never supplied an exhaustive list of what is considered preventive and what is not, some HDHPs have already been paying for treatment of at least some of the services listed in the chart for the associated conditions.

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