IRS Expands HSA Preventive Care Safe Harbor to Include Chronic Conditions

IRS Expands HSA Preventive Care Safe Harbor to Include Chronic Conditions

On July 17, 2019, the Internal Revenue Service (IRS) released Notice 2019-45, which expands the definition of preventive care benefits that can be provided by a high deductible health plan (HDHP) to include certain chronic conditions.  The guidance in the Notice may be relied upon immediately.  In general, most HDHP participants may establish and contribute to a health savings account (HSA), unless there is disqualifying coverage—such as having other medical benefits available besides preventive care before the minimum annual deductible is satisfied.

Overview

Under Section 223(c) of the Internal Revenue Code (Code), an HSA-qualified HDHP is not required to impose a deductible for certain preventive care services. This preventive care safe harbor includes services such as annual physicals, well-child care, and immunizations. Notably, prior to the Notice, preventive care did not include any service to treat existing illnesses, injuries, or conditions. Likewise, drugs or medications were treated as preventive care only when taken by a person who has developed risk factors for a disease that has not yet manifested itself or has not yet become clinically apparent (i.e., the individual is asymptomatic) or when the drugs are taken to prevent the recurrence of a disease from which a person has recovered.

Ultimately, the goal of the preventive care safe harbor is to encourage HDHP participants to receive routine care with a lower cost barrier, which should lead to better health outcomes.  By expanding the list of medical services that can be classified as preventive care, the IRS recognizes that cost barriers for care have resulted in some individuals with certain chronic conditions failing to seek care that would prevent exacerbation of their condition, which can lead to consequences such as amputation, blindness, heart attacks, and strokes that require considerably more extensive medical intervention.

In the Notice, the IRS expands the definition of preventive care to include coverages for specific chronic illnesses, in order to encourage necessary care and mitigate the consequences of not receiving care. It is also pursuant to President Trump’s executive order released on June 24, 2019, which instructs the agencies to allow HSAs to cover other low-cost preventive care to help maintain health statuses of participants with chronic illnesses. Such conditions will be considered preventive care only if the care is for one of the conditions listed below, and only when the care occurs for the purpose of preventing exacerbation of the condition or development of a new, secondary condition. Any care, services, or conditions not listed within the Notice (or other IRS guidance) will not be treated as preventive care and will not be permitted under the preventive care safe harbor.

Preventive Care under Code Section 223 now includes the following care and conditions:

Preventive Care for Specified Conditions For Individuals Diagnosed with
Angiotensin Converting Enzyme (ACE) inhibitors Congestive heart failure, diabetes, and/or coronary artery disease
Anti-resorptive therapy Osteoporosis and/or osteopenia
Beta-blockers Congestive heart failure and/or coronary artery disease
Blood pressure monitor Hypertension
Inhaled corticosteroids Asthma
Insulin and other glucose lowering agents Diabetes
Retinopathy screening Diabetes
Peak flow meter Asthma
Glucometer Diabetes
Hemoglobin A1c testing Diabetes
International Normalized Ratio (INR) testing Liver disease and/or bleeding disorders
Low-density Lipoprotein (LDL) testing Heart disease
Selective Serotonin Reuptake Inhibitors (SSRIs) Depression
Statins Heart disease and/or diabetes

 

Impact on Employers and Plan Participants

Employers and plan sponsors that offer an HSA-qualified HDHP, and their participating employees, should understand which conditions and services are now included under the preventive care definition.  While use of the expanded safe harbor is voluntary, we expect that many plans will adopt it.  The expanded safe harbor could benefit employers—especially those with self-funded plans—and allow for further cost-savings by covering chronic illnesses before a deductible is met.

 

About the Author.  This alert was prepared for Alera Group by Marathas Barrow Weatherhead Lent LLP, a national law firm with recognized experts on the Affordable Care Act.  Contact Peter Marathas or Stacy Barrow at pmarathas@marbarlaw.com or sbarrow@marbarlaw.com

The information provided in this alert is not, is not intended to be, and shall not be construed to be, either the provision of legal advice or an offer to provide legal services, nor does it necessarily reflect the opinions of the agency, our lawyers or our clients.  This is not legal advice.  No client-lawyer relationship between you and our lawyers is or may be created by your use of this information.  Rather, the content is intended as a general overview of the subject matter covered.  This agency and Marathas Barrow Weatherhead Lent LLP are not obligated to provide updates on the information presented herein.  Those reading this alert are encouraged to seek direct counsel on legal questions.

© 2019 Marathas Barrow Weatherhead Lent LLP.  All Rights Reserved.