Two years ago, the U.S. Treasury Department and the IRS issued IRS Notice 2019-45, which added coverage of prescription drugs and other treatments for chronic conditions to the list of health care benefits preventatives that a high-deductible health plan (HDHP) can pay for. even if a policyholder’s health care expenses did not exceed the plan’s deductible, without violating the rules allowing pretax contributions to health savings accounts (HSAs).
Employers were allowed to modify their HDHPs to offer expanded pre-deductible care for chronic conditions, but were not required to do so.
According to a new report from the nonprofit Employee Benefit Research Institute (EBRI) in Washington, D.C., Employer Adoption of Pre-Deductible Coverage for Preventive Services in HSA-Eligible Health PlansThree-quarters of large U.S. employers offering HSA-eligible health plans have expanded predeductible coverage for drugs and services that keep chronic conditions under control, in response to IRS Notice 2019-45.
Data for this study comes from a survey of benefits decision makers at 354 U.S. companies with at least 200 employees conducted in July and August.
“Smarter deductibles (for) services that prevent chronic disease exacerbation could be a natural evolution for health plans,” said Paul Fronstin, director of EBRI’s Health Research and Education Program and co-author of the report.
“Value-based reimbursement promotes the delivery of high-quality, evidence-based care that encourages the use of high-value services rather than creating barriers to access,” Fronstin said. “Interventions that improve patient-centered outcomes while maintaining affordability can be found in the form of clinically nuanced, HSA-eligible health plans that better meet the clinical and financial needs of workers.” »
Employers have given several reasons to justify the addition of predeductible coverage for 14 Health Care Services Allowed Under IRS Notice 2019-45. Those who made changes did so primarily for the benefit of their employees, but many also had business considerations, saying that expanding predeductible coverage for chronic conditions:
- It was the right thing to do (cited by three-quarters of respondents).
- Help with employee retention (two-thirds).
- Help attract new recruits (a half).
- Is a long-term saving measure (a half).
Future expansion of health care services sought
The Coronavirus Aid, Relief, and Economic Security (CARES) Act authorized HSA-eligible health plans to provide pre-deductible coverage for telehealth servicesbut only through 2021. Normal cost sharing may still be imposed for telehealth visits, such as through co-payments that the plan may require after the deductible has been met.
Most employers would offer additional pre-deductible coverage if the law allowed it, EBRI found. In particular, respondents wanted:
- Make permanent the CARES Act provision authorizing pre-deductible coverage for telehealth services under an HSA eligible plan (three-quarters).
- Grant a temporary extension of predeductible telehealth coverage beyond the end of 2021 (a fifth).
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SHRM encourages continuation of pre-deductible telehealth coverage On November 10, the Society for Human Resource Management (SHRM) wrote to the leaders of the Democratic and Republican committees of United States House of Representatives and Senate urging them to maintain pre-deductible coverage of telehealth services for high-deductible health plans and treat telehealth services as an excluded benefit. Both policies were temporarily made available to employers under the CARES Act. “Americans with high-deductible health plans and health savings accounts…can currently receive pre-deductible telehealth benefits. Unfortunately, this provision will expire on December 31,” according to the letters signed by Emily M. Dickens, SHRM Chief of Staff, Head of Government Affairs and Secretary General. “First-dollar coverage is beneficial to employees because it allows a health insurance provider to cover telehealth services without a patient having to first pay their co-pay or deductible.” The letters also recommended that Congress promote access to telehealth services by permanently treating these services as an excluded benefit offered outside of employee health plans that must comply with many requirements of the Affordable Care Act and other statuses. “Prior to the COVID-19 pandemic, standalone telehealth service programs could be offered to full-time employees enrolled in an employer’s medical plan, but not to other workers,” SHRM noted. “The flexibilities included in the CARES Act temporarily allow all workers, including seasonal and part-time workers, to access telehealth as an excluded benefit. A permanent solution would allow employers to expand access to telehealth as an excluded benefit beyond the current public health emergency, and it would allow more workers to access telehealth services. |
Drug discounts do not count toward annual deductibles
In another regulatory development regarding predeductible coverage for HSA-eligible plans, the IRS issued Newsletter 2021-0014 earlier this year, addressing how prescription drug coupons and discounts affect an HDHP deductible and whether medical services covered by the HDHP under a state mandate are exempt of the HDHP franchise.
“The IRS has confirmed its previously published position that, for purposes of the HSA/HDHP, only actual medical expenses count toward the HDHP deductible“, according to Sarah Magill, an attorney in the Chicago office of the Seyfarth law firm, and Kelly Pointer, an attorney in the firm’s Houston office, in a Nov. 1 commentary.
For example, they explained, “if a person presents a coupon at the pharmacy reducing the price of a covered drug from $1,000 to $600, the amount credited toward the HDHP deductible is only $600, because this is the actual expense incurred by the person. »
The IRS further noted that state insurance law mandates have no effect on the HDHP rules.
“The HDHP rules require the covered individual to meet the minimum HDHP deductible before the plan can cover benefits other than preventative care,” Magill and Pointer noted. “For example, suppose a state requires insured plans to cover contraception and male sterilization services without cost sharing. Because these services would not be “preventative care” under Section 223 of the (Internal Revenue) Code, a plan that covers these services before an individual satisfies. the minimum deductible for an HDHP would not constitute an HDHP (HSA eligible), whether or not coverage of these benefits is required by state law.
The key takeaways from the IRS guidance, Magill and Pointer said, are:
- HDHP/HSA participants can use coupons and drug discountsprovided that the value of the coupon or rebate does not count toward the HDHP minimum deductible.
- Although insured HDHPs must cover certain benefits under applicable state laws, these benefits may not be covered without cost sharing that is otherwise applicable to non-preventative services (such as copayments) before the deductible is met.
