The IRS has issued two new Notices expanding the list of items and services that qualify as “preventive care” under health savings account (HSA)-compatible high deductible health plans (HDHPs) and as medical care expenses under group health plans. One Notice provides that condoms are now considered “medical care” expenses and can be covered/reimbursed by group health plans, including FSAs, HRAs and HSAs. The Notices take effect retroactively and provide that HSA-eligible HDHPs can permit pre-deductible coverage of certain over-the-counter (OTC) contraceptives, glucose/insulin treatment and breast cancer screening without affecting eligibility for HSAs.
Coinciding with the release of these Notices, the agencies proposed regulations to amend current Affordable Care Act (ACA) rules that would require preventive care to include certain OTC contraception (including condoms) without cost sharing and without a prescription.
Under Notice 2024-71, amounts paid for condoms can be reimbursed under a health FSA, HRA, HSA, or Archer MSA.
Under Notice 2024-75, the IRS retroactively expanded the list of preventive care benefits for HDHPs (see bullets below) without a deductible or with a deductible below the HDHP minimum deductible. Individuals must be covered by an HDHP (and have no disqualifying health coverage) to be eligible to contribute to an HSA.
OTC oral contraceptives, including OTC birth control pills and emergency contraceptives, for individuals potentially capable of becoming pregnant, regardless of whether they are purchased with a prescription.
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 (does not include male sterilization and other male contraceptives).
All types of breast cancer screenings other than mammograms (e.g., MRIs or ultrasounds) for individuals who have not been diagnosed with breast cancer.
Continuous glucose monitors for individuals diagnosed with diabetes.
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.
Note that Notice 2024-75 only addresses items that may be treated as preventive care for purposes of the HDHP preventive care safe harbor. It does not address what the ACA requires non-grandfathered health plans to cover in the way of specific recommended “preventive care services” on a “first-dollar basis” (that is, without any copayments, deductibles or other cost sharing). So, for example, currently the ACA’s preventive care mandate requires health plans to cover OTC preventive products without cost sharing only when they are prescribed by a health care provider. However, the agencies have recently released proposed preventive services regulations that may impact some of these issues.
These proposed rules would require, for the first time, that most group health plans cover OTC contraceptives without cost sharing and without a prescription. The proposed rules also would require these plans to cover all recommended contraceptive drugs and drug-led combination products, unless a therapeutic equivalent is already covered without cost sharing. The proposed effective date for these requirements is plan years beginning on or after January 1, 2026. Lastly, it is possible the U.S. Supreme Court may take up a closely watched case (see petition for certiorari) impacting the ACA's preventive services mandate. If certiorari is granted, we would expect the outcome of the case to provide much needed clarification on preventive service mandate issues.
Health FSA, HRA, and HDHP administrators will want to take note of the guidance from the new Notices referenced above, which will be good news for participants and HSA account holders. Employers with HDHPs should review their plans’ design and consider whether to cover these expanded items without a deductible. Keep in mind that changes made as a result of the guidance may require plan amendments and changes to summary plan descriptions or other communications to participants.
Should you have questions, contact your Conner Strong & Buckelew account representative toll-free at 1-877-861-3220. For a complete list of Legislative Updates issued by Conner Strong & Buckelew, visit our online Resource Center.
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