On July 17, the IRS released Notice 2019-45 (the Notice), expanding the concept of preventive care to certain services and items targeting specific chronic diseases, such as test strips and insulin for diabetes. As high-deductible health plans (HDHPs) and health savings accounts (HSAs) gain popularity, the relationship between consumer-driven health plans and chronic disease management has become a topic of debate. Supporters of HSA reform have asserted that the limited preventive care and chronic disease management services that can be covered at low cost or on the first dollar (i.e., before an employee reaches the HDHP deductible) pose a significant barrier to comprehensive employee health care. covered by HSAs.
Although the IRS has previously provided guidance (see Opinion 2004-50, Notice 2018-12) regarding preventive care, the IRS had not expanded the definition to include elements and treatment of chronic illnesses, such as diabetes, depression, and heart disease.
The notice, which is effective immediately, provides a specific list of items that the Treasury Department has determined may be included in the preventive care category (and therefore provided under a high-deductible health plan before an individual meets their deductible without compromising a participant’s health. HSA Eligibility):
Note that these services/items are considered preventative care (and therefore not subject to the HDHP deductible) only to the extent that they are used to treat the chronic conditions specified in the list above. If they are used to treat other conditions, they are not considered preventative care.
Although the IRS provided a list of criteria used to select these items for inclusion in the definition of preventive care, the Service specifically stated that the notice “does not expand the scope of preventive care beyond the list » and that services or items that meet the criteria but are not on the list should not be treated as preventative care (unless they are first covered by advance directives).
The notice raises some short-term issues for large employers that offer HSAs/HDHPs:
- Lack of access to affordable treatment for chronic conditions is often cited as one of the primary reasons employees have chosen traditional health coverage options over HSA/HDHPs when offered in tandem. The new preventive care rules could provide an opportunity to “revive” HSA/HDHP options and potentially increase employee participation.
- Employers may want to consider offering one or more preventive care items through their existing on-site health clinic. Many employers with HSAs have reduced or eliminated chronic disease treatment components offered at on-site clinics to comply with previous preventive care rules related to HSAs.
- Better access to chronic care may result in additional costs. As expenses for certain out-of-pocket chronic care costs are transferred to the HDHP, plans will need to determine whether current deductible limits and premiums will be sufficient to meet the plan’s increased benefit expenses.
- The guidelines cover some, but not all, chronic disease treatment elements and services. Plans will be required to engage in a significant education campaign between now and the 2020 open enrollment season to help employees and their dependents with chronic illnesses understand the specific impact of the guidelines on their options for healthcare coverage for next year.
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