IRS Adds to Preventive Care Benefit List for HDHPs

Notice 2024-75

HDHP Background

A high-deductible health plan (HDHP) is a health plan with prescribed minimum deductible and maximum out-of-pocket amount limits. To be eligible to contribute to a health savings account (HSA), individuals must be covered by an HDHP (and not be enrolled in other disqualifying health coverage).

Generally, an HSA-compatible HDHP cannot pay for benefits until the applicable minimum deductible for that plan year is satisfied. However, Internal Revenue Code (IRC) Section 223(c)(2)(C) provides a safe harbor for preventive care to be covered on a first-dollar basis and before satisfying an HDHP’s deductible.

Preventive care generally does not include any service or benefit intended to treat an existing illness, injury, or condition^[1].

ACA Preventive Care Services Mandate

As a reminder, the Affordable Care Act (ACA) requires non-grandfathered health plans to cover a range of recommended preventive services without participant cost-sharing. This means these preventive services must be covered with no deductibles, copayments, or coinsurance (often referred to as “first-dollar coverage”).

Preventive services include screening tests, immunizations, behavioral counseling, and medications that can prevent the development or exacerbation of diseases and health conditions and include the following:

• Evidence-based items or services with an “A” or “B” rating included in the current recommendations from the U.S. Preventive Services Task Force (USPSTF), including cancer screenings, other disease screenings, and PrEP coverage to prevent transmission of HIV.
• Vaccinations recommended by the Advisory Committee (ACIP) and endorsed by the Director of the Centers for Disease Control and Prevention (CDC), including childhood and adult vaccinations, including COVID-19 vaccinations.
• Women’s health services recommended by the Health Resources and Services Administration (HRSA) and endorsed by the Secretary of Health and Human Services, including prenatal care, contraceptives, breastfeeding services/supplies, and wellness examinations.
• Preventive care and screenings recommended for infants, children, and adolescents provided for in other HRSA guidelines.

Notice Guidance

IRS Notice 2024-75 expands the list of preventive care benefits and services that are permitted to be covered by HDHPs without first satisfying the deductible, or with a deductible below the minimum annual deductible, including:

• OTC oral contraceptives for an individual potentially capable of becoming pregnant, including, but not limited to, OTC birth control pills and emergency contraception, regardless of whether or not they are purchased with a prescription.
  • Click here for a previous Risk Strategies article first reporting on the availability of OTC birth control pills in March 2024.

  Retroactive effective date for OTC oral contraceptives clarification is December 30, 2022.

• Male condoms, regardless of whether they are purchased with a prescription and regardless of the gender of the individual covered by the HDHP who purchases them.
  • The IRS reconsidered its previous position in Notice 2028-12, which concluded that neither male sterilization nor male contraception qualified as preventive care for HSA purposes.

  Retroactive effective date for male condom clarification is December 30, 2022.

  Condom Safe Harbor

  In a companion notice issued on the same day (Notice 2024-71), the IRS clarified that amounts paid for condoms are treated as medical care expenses, pursuant to IRC Section 213(d), under a safe harbor. As such, these expenses can either:

  • Be deductible expenses on an individual’s income tax return (if certain conditions are met), or
  • Reimbursed by an HSA, health care flexible spending account (FSA,) or health reimbursement arrangement (HRA).

  Notably, this means that individuals cannot “double-dip” by taking a deduction for the condom expense on their tax return and then also receiving a reimbursement for the same expense from their applicable HSA, FSA, or HRA.

• All types of breast cancer screenings for individuals who have not been diagnosed with breast cancer.
  • This includes not just mammograms (initially included in IRS Notice 2004-23 safe harbor preventive care screening services) but also magnetic resonance imaging (MRIs), ultrasounds, and similar breast cancer screening services.

  Retroactive effective date for breast cancer screenings clarification is April 12, 2004.

• Continuous glucose monitors for individuals diagnosed with diabetes.
  • Notably, if a continuous glucose monitor has additional medical functions, such as insulin delivery, those functions also would need to be preventive care to be covered as first-dollar coverage.
  • If a continuous glucose monitor provides additional medical or non-medical functions that are not preventive care (other than minor functions, such as clock and date functions), it cannot be covered before the individual satisfies the HDHP minimum deductible.

  Retroactive effective date for continuous glucose monitors clarification is July 17, 2019.

• Selected insulin products, regardless of whether they are prescribed to treat an individual diagnosed with diabetes or prescribed for the purpose of preventing the exacerbation of diabetes or the development of a secondary condition.
  • “Selected insulin products” means any dosage form (such as vial, pump, or inhaler dosage forms) of any different type (such as rapid-acting, short-acting, intermediate-acting, long-acting, ultra-long-acting, and premixed) of insulin, pursuant to IRC Section 223(c)(2)(G).

  Retroactive effective date for selected insulin products clarification is December 31, 2022.

Proposed Rule Expanding Coverage of OTC Contraception Under the ACA

While on the general topic of OTC contraceptives discussed above, the federal agencies released a proposed rule on October 21, 2024, that, when or if finalized, would expand access to OTC contraceptive coverage without cost-sharing under the ACA’s preventive care mandate.

• First-dollar OTC contraception coverage: Health plans would be required to cover recommended OTC contraceptive items without requiring a prescription and without participant cost-sharing.
• First-dollar coverage of prescribed contraception: Health plans would be required to cover every FDA-approved contraceptive drug or drug-led combination product without cost-sharing unless the plan also covers a therapeutic equivalent without cost-sharing.
• Plan disclosure: Health plans would also be required to disclose to plan participants that OTC contraception is covered without requiring a prescription and without participant cost-sharing.

Click here for the White House Fact Sheet with more information regarding this proposed rule.

Employer Next Steps

Employers sponsoring HSA-compatible HDHPs are advised to consult with their insurance carriers (for fully insured plans) or third-party administrators (for self-funded plans) to determine next steps with respect to cost-sharing plan design in compliance with the revised guidance.

These next steps will presumably include considering the financial impact to the HDHP when deciding whether or not to cover these OTC items (both oral contraceptives and male condoms) without a deductible.

On a related HSA topic, employers should be aware that the temporary HSA telehealth relief extended under previous COVID-related federal legislation will expire on December 31, 2024, absent an extension by Congress. Employers who adopted this optional measure for their HSA-qualifying HDHPs should prepare to implement cost-sharing for telehealth (and remote care services) starting on January 1, 2025 for HDHP enrollees.

Finally, employers should monitor the progress of the proposed rule expanding coverage of OTC contraception under the ACA, as detailed above.

Risk Strategies is committed to keeping employers informed and up-to-date. Reach out to your Risk Strategies account team with any questions or email us directly at benefits@risk-strategies.com.

[1] IRS Notice 2004-23.