Good news for employers that offer a Health Savings Account (HSA) or are interested in doing so! The IRS has just issued new guidance expanding the definition of “preventive care” that may be covered by an HSA-eligible high deductible health plan prior to the deductible being met. This change should make HSAs more appealing to employers and employees alike.
HSAs must be paired with a high deductible health plan (HDHP) that covers only “preventive care” until after the deductible is met. Historically, the definition of “preventive care” has been narrowly restricted to such things as immunizations, annual exams, and standard screenings. Other than these limited types of expenses, employees on an HSA-eligible HDHP are required to pay all medical expenses out of pocket up to the amount of the deductible (or use their HSA money).
While HSAs are widely seen as a way to control health care costs, the main criticism has been that they can discourage participants from getting the health care they need and cause worsening health conditions in the long run. The new guidance from the IRS is intended to mitigate that problem.
What is Added?
The new types of medical expenses that can be covered as “preventive care” by an HDHP include a number of medications, tests, therapies, and devices that prevent or minimize the effects of various health conditions, including heart disease, osteoporosis, high blood pressure, asthma, diabetes, depression, and several other conditions. The specific treatments that can be covered as preventive care by a HDHP are listed in the guidance.
NOTE that this guidance redefines preventive care only in the context of the types of expenses that may be reimbursed by an HSA-eligible HDHP before the deductible is met. It does not require plans to provide these services for free (but we would expect many HDHPs to be designed that way).
While the effective date of the notice is July 17, 2019, how quickly you can expand your HDHP to cover the additional types of preventive care will depend on whether you are self-insured or fully insured.
- If you are self-insured and already offer an HSA-eligible plan, you may want to consider making this change sooner rather than later. We can work with you and your plan administrator and hopefully would be able to make it happen fairly quickly.
- If you are self-insured and don’t yet offer an HSA, now is a great time to add one! They are a great way to offer a lower cost plan option to your employees and reduce your costs in the process.
- If you’re fully insured, any expansion of the types of preventive care covered by an HSA-eligible HDHP will have to go through the regular approval process through the state departments of insurance. That will take some time, but we will be reaching out to the carriers in our area to ascertain their plans for making these changes available.
As always, feel free to contact me, your account executive, or your producer for additional information.