To Treat or To Prevent? That Is (Still) the HSA Question
This past summer, the IRS expanded the list of preventive care services that may be covered before the deductible is met without loss of HSA eligibility. The intent of the change was to give plan sponsors the flexibility to make HSAs work better for people diagnosed with chronic conditions. The Notice spelled out 14 services, items or drugs – “the List of 14” – that are now permissible when used to treat the corresponding chronic condition.
Generally, this Notice was welcome news, a long-awaited answer to years of questions as to what is preventive care and what it is not. However, as many employers have begun incorporating some, most or all of the List of 14 into existing preventive prescription drug lists (“PDLs”), the Notice’s answers have yielded more questions. We’ve highlighted two common issues below:
- Contraction, not expansion, of PDLs. The List of 14 has caused some PBMs and employers to remove items under their PDLs. Prior to the Notice, “preventive care” had been a legal grey area with regard to chronic conditions. Without specific IRS guidance, some drugs commonly used for treatment were classified as preventive because they help prevent the worsening of existing diseases. A secondary preventive list of sorts developed as a result. ;
With the Notice, what was grey is now black and white. The List of 14 is exhaustive, and the IRS criteria for the items on the list may not be used to justify covering other services, items and drugs on a pre-deductible basis without jeopardizing HSA eligibility. This topic was raised in October at the Health and Welfare Benefit Plans National Institute sponsored by the American Bar Association. An IRS representative’s non-binding comment was that a secondary preventive list is not supported by prior IRS guidance or the current Notice.
- Point of sale. The List of 14 is only permitted on a pre-deductible basis for persons with the corresponding chronic condition. Here are three examples that tell the tale of the confusion this can cause. First, inhaled corticosteroids are preventive only for individuals with asthma, not other chronic lung conditions. Second, Selective Serotonin Reuptake Inhibitors (SSRIs) are only permitted if the individual was diagnosed with depression, but not anxiety. Third, a tangential depression issue is that a Serotonin and Norepinephrine Reuptake Inhibitors (SNRI) are not preventive, even though SSRIs are.
Now imagine an individual visiting a pharmacy for a prescription. The pharmacist likely does not know the diagnosis because this information is rarely communicated from doctor to pharmacy. The Notice’s strict correlation of item with specified chronic condition creates the possibility that a plan could inadvertently cover a drug as preventive when it is for a condition that is not on the List of 14, thereby jeopardizing HSA eligibility.
Recent legislation addresses the inhaler issue. The Inhaler Coverage and Access Now Act (HR 4716) would allow pre-deductible coverage of inhalers to treat chronic lung disease. That bill passed the House Ways and Means Committee in October and awaits further action on the House floor. It may have a long wait, but perhaps not as long as the 5-to-10-year window the IRS communicated about revising the List of 14. Of course, the IRS could consider a shorter window.
Until then, employers should be aware of these issues as they review their HSA-eligible medical plan designs.