IRS HSA-Eligible HDHP Chronic Condition Expenses Updates

The IRS (in coordination with the Department of Health and Human Services) quietly provided guidance that HSA-eligible high deductible health plans (HDHPs) consider a number of popular medical services, medications, and devices, such as insulin, inhalers, and statins as “preventative care“. For plans that adopt that guidance, these items could be fully covered by the insurer before the deductible.

“Preventative care” and “before the deductible” were bolded above for emphasis, as this could be a very significant change for those with certain chronic health conditions who have had to often pay for these devices, medications, and services out-of-pocket until their annual out-of-pocket maximum was met. To qualify as a high deductible health plan, an HDHP generally may not provide benefits for any year until the minimum deductible for that year is met. However, an HDHP is not required to have a deductible for preventive care (as defined by HDHP/HSA rules).

And since HDHPs typically have very high annual deductibles ($1,400 minimum per individual, $2,800 per family in 2021), before insurance coverage even begins to share in the costs, with very high annual maximum out-of-pocket costs ($7,000 individual, $14,000 per family in 2021), annual costs have been very significant for those with chronic conditions with HSA-eligible plans.

hdhp hsa preventative chronic conditions

Here are the devices, medications, and services that are now considered preventative for HSA-eligible HDHP plans:

Preventive Care for Specified Conditions: For Individuals Diagnosed with:
Angiotensin Converting Enzyme (ACE) inhibitors Congestive heart failure, diabetes, and/or coronary artery disease
Anti-resorptive therapy Osteoporosis and/or osteopenia
Beta-blockers Congestive heart failure and/or coronary artery disease
Blood pressure monitor Hypertension
Inhaled corticosteroids Asthma
Insulin and other glucose lowering agents Diabetes
Retinopathy screening Diabetes
Peak flow meter Asthma
Glucometer Diabetes
Hemoglobin A1c testing Diabetes
International Normalized Ratio (INR) testing Liver disease and/or bleeding disorders
Low-density Lipoprotein (LDL) testing Heart disease
Selective Serotonin Reuptake Inhibitors (SSRIs) Depression
Statins Heart disease and/or diabetes

This news surprisingly got little press, given the magnitude of the change, so I thought I’d share it with all of you, in the hopes that awareness of the change could save some money for those of you (or your loved ones) with chronic health conditions. If you have had high health care expenses related to these costs, but have previously shied away from lower-cost HDHP plans because of it, it is probably worth crunching the numbers to see if a switch to an HDHP could save you money. Being able to add a tax-free HSA to your arsenal to combat health care costs could be a game changer.

Note: this is IRS guidance only, not a mandatory requirement that HSA-eligible HDHPs cover all costs for items outlined above. You will have to confirm with insurers for the plans you are considering using, to be sure. Additionally, I would not expect many changes in advance of next year’s plans rolling out in open enrollment this fall.

In general, I think this is a positive change, as it has the potential to level the playing field on health care costs for individuals with high-cost chronic conditions and encourages them to seek the treatment that they truly need for their conditions. And they too now could have realistic access to HSA-eligible plans, like the rest of us. The potential downside, however, is the impact this could have on premiums and deductibles for everyone else purchasing HSA-eligible plans. In the interest of fairness, I’m willing to live with that.

The full IRS guidance on this change can be found in IRS notice 2019-45. And check out my best HSA account picks – as you can transfer funds from any HSA to a preferred new HSA.

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