IRS Responds to Request for Expansion of HDHP-Compatible Coverage

The IRS has released an information letter responding to a request for guidance that would expand the medical care that may be provided by a high-deductible health plan (HDHP) before the minimum annual deductible has been satisfied. As background, individuals who wish to make or receive HSA contributions must be covered by a qualifying HDHP and have no impermissible coverage. To qualify as HDHP coverage, a health plan must satisfy certain requirements, including the imposition of a minimum annual deductible. Preventive care benefits, however, may be provided without a deductible or with a deductible below the statutory minimum. To qualify as preventive care, a benefit must be defined as such under the Social Security Act or in IRS or Treasury Department guidance (see our Checkpoint article).

The guidance request that prompted the information letter asked for two changes: first, that the IRS allow HDHPs to provide coverage for primary and behavioral health care visits before the minimum deductible is satisfied, and second, that the IRS reverse its position in Notice 2018-21 and allow male contraceptives to be considered preventive care for HDHP (and therefore HSA eligibility) purposes (see our Checkpoint article). The letter states that the IRS will treat the request as a “submission for a guidance recommendation,” and notes the importance of public input in preparing its Priority Guidance Plans. The remainder of the letter summarizes relevant current guidance, including the definition of preventive care for HSA eligibility purposes; the fact that IRS guidance controls what is considered preventive care notwithstanding state laws that may characterize care as preventive; and that under IRS Notice 2018-21, health plans offering male sterilization or contraceptives before satisfaction of the required minimum deductible do not qualify as HDHP coverage.

EBIA Comment: When the IRS issued Notice 2018-21, it also provided transition relief giving states time to change their laws requiring health insurance policies to cover male sterilization or male contraceptives without cost-sharing. That transition relief has expired, but some states continue to be interested in requiring contraceptive coverage without cost-sharing or gender restrictions, so the IRS may put the subject back on its docket for further consideration. For more information, see EBIA’s Consumer-Driven Health Care manual at Sections VIII (“Health Savings Accounts (HSAs): Introduction”), X.G (“Required HDHP Coverage: Preventive Care”), and X.J.2 (“State-Mandated Services May Not Be Preventive Care”). You may also be interested in our webinar “Health Savings Accounts (HSAs) in 2021: Advanced Issues and Recent Developments” (recorded 5/26/2021).

Contributing Authors: EBIA Staff.