Treasury Department issues new guidance for HDHPs

The new notice increases the services that can be covered pre-deductible by expanding the definition of preventive care.

Previously, preventative care only applied to services that were not provided in response to a particular condition, such as annual physicals. (Photo: Shutterstock)

The U.S. Department of Treasury released a notice Wednesday that could have major implications for high-deductible health plans by allowing plans to pay for certain services even if a patient has not yet met their deductible.

“We are pleased and proud that the Treasury Department is pursuing valuable guidance to increase the usefulness of health savings accounts (HSAs),” said American Benefits Council (Council) President James A. Klein in a statement.

At issue are federal regulations that prohibit any health plans that provide members with health savings accounts from paying for non-preventative health care before the patient hits their annual deductible. The regulations are aimed at encouraging individuals to take more responsibility for their health care spending and become better health care consumers.

Related: Legislative changes for chronic conditions: What employers need to know

However, as high-deductible plans have increased in recent years, patient advocates and doctors have complained that high deductible plans often lead to patients avoiding necessary care due to cost.

The new notice increases the number of services that can be covered pre-deductible by expanding the definition of “preventative care.” Previously, preventative care only applied to services that were not provided in response to a particular condition, such as annual physicals. Now, the IRS will consider treatments for certain chronic conditions to be preventative.

“(T)he Treasury Department and the IRS are aware that the cost barriers for care have resulted in some individuals who are diagnosed with certain chronic conditions failing to seek or utilize effective and necessary care that would prevent exacerbation of the chronic condition,” said the notice. “Failure to address these chronic conditions has been demonstrated to lead to consequences, such as amputation, blindness, heart attacks, and strokes that require considerably more extensive medical intervention.”

That could include medication that is prescribed to treat a chronic condition, such as diabetes or high blood pressure.

“These conditions represent an enormous drain on the economy through high health costs and reduced employee productivity,” said Klein. “Modernizing HSAs to address chronic disease prevention is important to help tackle this problem. We remain committed to working with the Administration and Congress to build on this guidance and make HSAs more flexible.”

For services to be covered by an HDHP pre-deductible, says the notice, they should be “low-cost” and demonstrate a high-impact. In addition, there must be strong evidence that the absence of the service will result in the conditioning worsening or the development of another serious medical issue.

“As more and more Americans are facing high deductibles, they are struggling to pay for their essential medical care,” said V-BID Center Director, Dr. Mark Fendrick. “Our research has shown that this policy has the potential to lower out-of-pocket costs, reduce federal health care spending, and ultimately improve the health of millions diagnosed with chronic medical conditions.”

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