IRS Announces New Preventive Guidance for HDHP Plans
Members enrolled in high deductible health plans (HDHPs) may contribute to health savings accounts (HSAs) on a pre-tax basis if the HDHP meets certain criteria1. For example, the plan must have a deductible above a specified dollar amount and an out-of-pocket limit below a specified dollar amount2. Generally, all member cost-sharing for covered services must apply toward the deductible for the plan to be an HDHP, with the exception of preventive care. The exception allows – but does not require – HDHPs to cover preventive services before the deductible is met.
Previous IRS Guidance
In 2004, the IRS issued guidance on two occasions to help issuers and group health plans understand what it means to be a preventive service for HDHPs3. The guidance provides a non-exhaustive list of services that may be considered preventive, including physical exams, screenings, and prescription drugs in certain situations. However, the guidance says that preventive care does not generally include any service or benefit intended to treat an existing illness, injury, or condition.
New IRS Guidance
On July 17, 2019, the IRS issued Notice 2019-43, which provides additional guidance that expands the definition of preventive services for HDHP plans. The Notice says that some members with HDHPs may not receive the care they need due to cost barriers. As a result, the IRS is classifying certain items and services as preventive care for members with specified chronic conditions.
The Notice includes a list of items and services that may be considered preventive for chronic conditions, but says that the IRS is not expanding the scope of preventive care beyond the list and the prior guidance. The Notice does not require issuers or plans to cover the additional items before the deductible is met – this continues to be optional.
The Affordable Care Act (ACA) has its own preventive coverage requirements that are separate and apart from the HDHP preventive guidelines. Non-grandfathered individual and group plans – including non-grandfathered self-funded plans – are required to cover ACA preventive services with no cost-sharing when members receive care in-network.
Sometimes, the HDHP preventive items and ACA preventive items overlap. It’s important to remember that ACA preventive services are a legal requirement for non-grandfathered plans. Any time there is an overlap, the ACA preventive requirements will take precedence over the HDHP preventive allowance.
For example, the ACA requires coverage of statins to prevent heart disease as a preventive service with no member cost-share. The HDHP preventive guidelines also allow for coverage of statins as a preventive service, which could be covered with copay. In this situation, the ACA requirement will prevail when a plan is non-grandfathered – the applicable statins must be covered with no cost-sharing. Statins that are not identified as an ACA requirement could be considered an HDHP preventive item.
1Additional criterion applies. For example, the member cannot contribute toward an HSA if he or she is enrolled in an HDHP and also another medical plan that is not an HDHP.
2For more information about the HDHP minimum deductible and maximum out of pocket for plan years beginning in 2020, please refer to the June 10, 2019 Health Care Reform Update article.
3See IRS Notice 2004-23 and Notice 2004-50.
4The ACA also requires A1c testing to be covered as preventive as part of diabetes screenings.