IRS Allows Health Plans to Cover More Treatments Before Deductible is Met

updated July 25, 2019

TThe Treasury Department and the IRS have added treatments for a range of chronic conditions to the list of preventive care benefits for which a high-deductible health plan (HDHP) can pay, even if a person’s health expenses insured have not exceeded the plan deductible. – without violating the rules allowing pre-tax contributions to health savings accounts (HSAs).

Medical care, including prescription medications, for certain chronic illnesses will now be classified as preventative care for a person diagnosed with that illness, according to July 17.
Notice 2019-45, which immediately took effect. Any medical care previously recognized as preventive care under IRS rules is still treated as preventive care.

The new guidelines add to the types of medical care that can now be treated as “preventative” 14 Profitable Items or Services likely to prevent the worsening of a chronic disease or the development of a secondary disease that would require more expensive treatment. These include beta blockers for coronary heart disease, insulin for diabetes and statins for heart disease, as well as devices such as blood pressure monitors for hypertension and glucometers for diabetes.

Adjustment of HSA rules

Employees covered by an HDHP can contribute to an HSA. To comply with IRS rules regarding making HSA contributions with pre-tax dollars, an HDHP cannot provide benefits for any year until the minimum deductible for that year is met. However, HDHPs are not required to have a deductible for preventative care.

President Donald Trump issued an executive order on June 24, directing the Secretary of the Treasury to issue guidance expanding patients’ ability to select HDHPs that can be used alongside an HSA. The guidelines, Trump said, should cover low-cost, pre-deductible preventive care to help maintain the health of people with chronic illnesses.

Allowing “coverage for conditions that typically require medications or maintenance therapies, such as diabetes, hypertension, or arthritis, will no longer prevent individuals enrolled in an otherwise HSA-compatible HDHP from making HSA contributions” , noted Scott Behrens, director of government relations at Lockton. , an employee benefits brokerage and consulting firm.

With
employers are increasingly offering HDHPs linked to HSAs, “The rules governing health savings accounts need to be modernized to meet consumer needs,” said Chatrane Birbal, director of policy engagement at the Society for Human Resource Management. The new guidance is a welcome development because otherwise “employees with chronic illnesses who enroll in HSA-qualified plans, particularly those whose employers offer only one plan, face significant barriers in care if they want to manage their chronic illnesses,” she noted.

Extension of coverage “below the excess”

Under Notice 2019-45, the following services and items for people with chronic illnesses may now be covered by an HDHP as preventative care.

The IRS action “allows consumers to more affordably and effectively manage their health and maintain better health,” said Mike DiSimone, president and CEO of PayFlex, a product administrator. and consumer services, including HSAs.

Making HDHPs More Attractive

“Given the expansion of the types of preventative (care) that an HDHP can cover and the tax benefits of an HSA for employees, employers who have not yet established an HDHP or HSA
I might consider doing it now.” wrote Carol V. Calhoun, an attorney with the Venerable Law Firm in Washington, DC.

“Increasing the attractiveness of HDHP/HSAs can potentially help more Americans improve their health outcomes while optimizing their healthcare spending,” said Kevin Robertson, chief revenue officer of HSA Bank, an HSA administrator. “Individuals suffering from these conditions can now receive these treatments for free, or at a lower cost, depending on how their insurance plan or employer decides to cover these services, without compromising an individual’s ability to pay into the health system. HSA.”

This change not only helps people with these chronic conditions, “but also helps remove perceived spending barriers for anyone evaluating whether an HDHP/HSA solution is right for them,” added Robertson.

“More people will now be able to enjoy the financial benefit of health savings accounts and will have the increased flexibility they need to use them,” DiSimone said.

With a broader definition of preventive benefits provided at low or no cost, “it’s more likely that these employees will take the necessary steps to stay healthy,” said David Speier, managing director of the firm’s employee benefits accounts. Willis Towers Watson consultancy. “By supporting employees with chronic illnesses, it is possible that the overall cost of the HSA-compliant plan may be reduced for employers.”

Increased coverage options

Plans will not be required to pay 100 percent for treatments on this list, explained Kim Buckey, vice president of client services at DirectPath, an education, enrollment and transparency transparency company. health care. “The notice simply means that these treatments are not subject to the HDHP deductible before being covered. So if the HDHP has a $2,000 deductible, and normally you would have to pay $2,000 out of pocket before these services are covered at, say, 80 percent of their cost, now the IRS says they can be covered at 80 percent even if the deductible is not yet met.

The services listed may also be subject to a different, lower deductible, “so the employer might say you have a $500 deductible for those particular services,” Buckey added.

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Legitimize a common practice

“This is good news for employers and employees,” Buckey noted. “Many employers have been covering these types of medications as ‘preventatives’ for patients with chronic conditions for some time now,” despite the risk that doing so could violate IRS rules, she noted. “It is encouraging to see the IRS recognize what is becoming a common practice.”

“The IRS has allowed medications prescribed even for existing conditions to be considered ‘preventive’ whether 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 disease,” wrote Edward Fensholt, senior vice president and director of compliance services at Lockton. “Drugs to treat high cholesterol (an existing disease) have “But outside of the pharmaceutical context, the IRS has resisted calls to treat existing disease care as preventative.”

Coverage of medications for chronic conditions, pre-deductible for HDHP enrollees, will “hopefully encourage patients to fill these prescriptions, stick to the regimen prescribed by their doctors, and delay or prevent the appearance of more serious and acute illnesses, which, in turn, will save both. “employer and employee money,” Buckey said.

“HDHP sponsors may find this guidance helpful as they prepare for the plan year that begins at the end of this year or in 2020,” Fensholt noted. “We half suspect, however, that because the IRS has never provided an exhaustive list of what is considered preventative and what is not, some HDHPs have already paid for treatment of at least some of the services listed in the table for associated conditions.”.