Benefits Insights

The IRS has responded to President Trump’s Executive Order (discussed in our prior blog post) with a Notice issued this week. The June Executive Order directed the IRS to issue guidance to expand the care high deductible health plans (“HDHP”) can cover before participants reach their deductible, while still allowing the participant to contribute to a health savings account (“HSA”). The Notice has done just that, and the changes made were immediately effective as of July 17, 2019.

Before this Notice, a participant in a HDHP would not be eligible to contribute to an HSA if the health plan covered the costs of medical care before the participant reached his deductible, unless those first dollar costs were defined as “preventive care.” The IRS stated in previous guidance that preventive care did not include any service or benefit intended to treat an existing illness, injury, or condition. This Notice partially reverses that guidance, and now an expanded list of medical care services received and items purchased (including prescription drugs) for certain chronic conditions are classified as preventive care.

The IRS has published a list of services and items that will be treated as preventive care when prescribed to an individual diagnosed with the associated chronic condition specified on the list, but only if prescribed for the purpose of preventing the exacerbation of the chronic condition or the development of a secondary condition. Although the IRS provided insight as to how the services and items were selected, it is clear that services and items not on the list will not be treated as preventive care. The IRS, in consultation with the Department of Health and Human Services, will periodically review (expected to occur every five to ten years) the list of preventive care services and determine whether additional services or items should be added or removed. Below is a copy of the expanded list of preventive care and associated chronic conditions as it appeared in the Notice.