On July 17, the IRS issued Notice 2019-45 (the Notice), expanding the concept of preventive care to certain services and items that target specific chronic conditions, such as testing strips and insulin for diabetes. As high-deductible health plans (HDHPs) and health savings accounts (HSAs) have risen in popularity, the relationship between consumer-driven health plans and chronic disease management has become a topic of debate. Advocates for HSA reform have asserted the limited preventive care and chronic disease management services that can be covered on a lower-cost or first-dollar basis (i.e., before an employee meets the HDHP deductible) are a significant barrier to comprehensive health care for employees covered by HSAs.
While the IRS previously provided guidance (see Notice 2004-50, Notice 2018-12) regarding preventive care, the IRS had not expanded the definition to include items and treatment for chronic conditions, such as diabetes, depression, and heart disease.
The Notice, which is immediately effective, provides a specific list of items that the Treasury Department has determined can be included in the category of preventive care (and therefore provided under a high-deductible health plan before an individual meets their deductible without jeopardizing a participant’s HSA eligibility):
Note that these services/items are considered preventive care (and thus not subject to the HDHP deductible) only to the extent they are used to treat the chronic conditions specified in the list above. If they are used for the treatment of other conditions, they are not considered preventive care.
While 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 that are not on the list should not be treated as preventive care (unless previously covered under prior guidance).
The Notice raises certain near-term issues for large employers that offer HSAs/HDHPs:
- Lack of access to affordable chronic care treatment is often cited as a key reason why employees chose traditional health coverage options over HSAs/HDHPs when offered in tandem. The new preventive care rules may present an opportunity to “re-launch” HSA/HDHP options and potentially increase employee take-up.
- Employers may want to consider offering one or more of the preventive care items through their existing on-site health clinic. Many employers with HSAs scaled back or eliminated chronic disease treatment items offered through on-site clinics in order to comply with previous preventive care rules related to HSAs.
- Greater access to chronic care treatment may come with additional costs. As the expenses for certain out-of-pocket costs for chronic care shift to the HDHP, plans will need to consider whether current deductible limits and premiums will be sufficient to meet the plan’s increased benefit expense.
- The guidance covers some, but not all, chronic care treatment items and services. Plans will need to engage in a significant education campaign between now and the 2020 open enrollment season to help employees and dependents with chronic conditions understand the specific impact of the guidance on their health care coverage options for next year.