IRS Expands List of Preventive Care Benefits for HSA-Compatible Plans

On July 17, 2019, the Internal Revenue Service (IRS) issued Notice 2019-45 to expand the list of preventive care benefits that may be provided under a high deductible health plan (HDHP) before the deductible is met. The expansion covers a specific list of medical services received and items purchased, including prescription drugs, for certain chronic conditions. The Notice was issued in response to President Trump's Executive Order 13877, "Improving Price and Quality Transparency in American Healthcare to Put Patients First" and is intended to increase the scope of services that may be provided under a HDHP before the deductible is met in order to maintain the health status for individuals with chronic conditions.

A participant in a HDHP generally must pay for all services received under the plan until the plan's minimum deductible is satisfied. For 2019, the statutory minimum deductible for HDHP coverage is $1,350 for those with single coverage and $2,700 for those with family coverage. These limits increase in 2020 to $1,400 and $2,800, respectively. By plan design, a HDHP may have a higher deductible (but may not have a lower deductible) than the statutory minimum level. Individuals who are enrolled in HDHP coverage – and who are not covered by any other disqualifying coverage – may fund a health savings account (HSA) to help pay for the out-of-pocket medical costs they incur before meeting their deductibles, as well as co-payments and coinsurance due under the plan.

Under an exception to the general rule, a HDHP may provide coverage for preventive care benefits before the deductible is satisfied. For this purpose, the scope of preventive care is determined by guidance issued by the Department of the Treasury and IRS. Under the guidance issued prior to Notice 2019-45, preventive care benefits generally will include: periodic health evaluations, including annual physicals; routine prenatal and well-child care; immunizations; tobacco cessation programs; obesity weight-loss programs; and specific screening services. Preventive care benefits also include all of the preventive services that plans and issuers are required to provide at first dollar under the Patient Protection and Affordable Care Act, in addition to drugs or medications when they are taken by a person who has developed risk factors for a disease that has not manifested itself or become clinically apparent or to prevent the reoccurrence of a disease from which a person has recovered. Prior guidance clarified, however, that preventive care benefits do not include any service or benefit intended to treat an existing illness, injury, or condition.

By expanding the scope of preventive care benefits under Notice 2019-45 to certain treatments for chronic conditions, the IRS and the Department of the Treasury, in consultation with the Department of Health and Human Services, stated the additional items and services are being included because of the clinical evidence that such items or services will prevent the exacerbation of a chronic condition or the development of a secondary condition that requires significantly higher cost treatments.

The list of additional items and services that will be treated as preventive care benefits that may be provided under a HDHP before the statutory minimum deductible is set out in the appendix to Notice 2019-45. They are:
 

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

 
These are items and services the IRS has determined meet the following characteristics:

• The service or item is low-cost;
• There is medical evidence supporting high-cost efficiency (a large expected impact) of preventing exacerbation of the chronic condition or the development of a secondary condition; and
• There is a strong likelihood, documented by clinical evidence, that with respect to the class of individuals prescribed the item or service, the specific service or use of the item will prevent the exacerbation of the chronic condition or the development of a secondary condition that requires significantly higher cost treatments.

The Notice makes clear that only the items and services in the appendix (and set forth above) are to be considered preventive services for chronic conditions – even if other items or services might meet the three criteria above. The appendix contains the exclusive list of the items and services that expand the preventive services allowed under a HDHP. Furthermore, they are only considered to be preventive services when they are prescribed for the purpose of preventing the exacerbation of the chronic condition or the development of a secondary condition. Thus, this is a limited expansion of the preventive care exception.

For more information about coverage rules for HDHPs or HSA rules, please contact Gary Blachman, Audra Ferguson-Allen, Melissa Proffitt, Shalina Schaefer, Kathleen Sheil Scheidt, Tara Sciscoe, Chris Sears, or the Ice Miller LLP Employee Benefits attorney with whom you work.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.