New IRS guidance on preventive care: What employers need to know

As we approach the end of 2024, who else is trying to make time to fit in preventive care appointments? With just under 8 weeks left in the year, I'm looking at my calendar and trying to find the time to book my remaining annual checkups. You know, the usual eye exams, dental cleanings, and annual physicals. Making these appointments is so important to stay on top of my health and catch any issues before they become serious.

In related news, we have some interesting information from the IRS to unpack-they just released two key rulings on a variety of preventive care topics.

How IRS preventive care changes may impact health benefits

Recently, the IRS issued new guidance to expand what's considered to be preventive care-from over-the-counter contraceptives and breast cancer screening to insulin and glucose monitoring. On Thursday, October 17, the IRS issued Notices 2024-71¹ and 2024-75², which mark significant changes in how preventive care is defined and covered under High Deductible Health Plans (HDHPs) and other health benefit accounts under Section 223 of the Internal Revenue Code (Code).

As we plan for 2025, let's tackle these changes together and explore how we can best prepare our organizations for the coming year.

Key IRS preventive care notices and their implications

These updates are poised to provide individuals with more access to essential medical services and products. In the new guidance, the IRS expanded items considered "preventive care" which allows people to access care free-of-charge even before they've met their HDHP minimum annual deductible. In this blog post, I'll walk you through the key aspects of these changes and what they mean for employers, benefits advisors, and HR managers.

IRS guidance on expanded male reproductive coverage

In Notice 2024-71, the IRS classified male condoms as medical expenses under Code § 213(d), making them eligible for reimbursement through Health Savings Accounts (HSAs), Health Reimbursement Arrangements (HRAs), Archer Medical Savings Accounts (Archer MSAs), and health Flexible Spending Arrangements (FSAs). This inclusion represents a broader understanding of preventive care, aiming to support safe and informed healthcare decisions.

IRS guidance on expanded coverage for contraceptives, breast cancer screenings, and diabetes care

Notice 2024-75 expands the range of preventive care benefits that can be offered through an HDHP under Code § 223(c)(2)(C) without a deductible, or with a deductible below the applicable minimum deductible for the HDHP. Key inclusions are:

• OTC oral contraceptives: Now covered, including emergency contraceptives and male condoms.
• Breast cancer screening: Extended to individuals not yet diagnosed with breast cancer, emphasizing early detection and prevention.
• Continuous glucose monitors: Available for those diagnosed with diabetes, highlighting ongoing care and management.
• Insulin products safe harbor: Provides coverage for certain insulin products regardless of whether insulin is prescribed for diabetes treatment or for prevention of complications, such as the exacerbation of diabetes or the development of a secondary condition.

Background on preventive care expenses under Code § 223

I think it's helpful here to provide context on how the IRS defines preventive care expenses. Code § 223 permits eligible individuals to establish HSAs, but among the requirements to qualify for an HSA, the individual must be covered under an HDHP and have no disqualifying health coverage.

Generally, an HDHP is not permitted to provide benefits for any year until the IRS minimum deductible for that year is satisfied. However, Code § 223(c)(2)(C) provides a safe harbor for the absence of a deductible for preventive care. Therefore, an HDHP may provide preventive care benefits without a deductible, or with a deductible below the minimum annual deductible otherwise required by Code § 223(c)(2)(A).

To be a preventive care benefit, the benefit must either be described as preventive care in Section 1861 of the Social Security Act or be determined to be preventive care in guidance issued by the Department of the Treasury and the IRS.

Individuals will have greater access to care

With these changes, individuals enrolled in HDHPs or utilizing health benefit accounts will have broader access to critical medical services without the burden of first reaching their annual deductible. This shift encourages proactive health management and early intervention.

Benefits for employers and benefits advisors

For employers and HR managers, these updates necessitate a review and potential adjustment of current benefits offerings. Ensuring that your organization's health plans align with IRS guidance can enhance employee satisfaction and contribute to a healthier workforce.

Wrapping up the latest IRS guidance on preventive care

With this welcome guidance from the IRS, individuals will have a greater ability to have more medical expenses covered by their HDHPs. And, they can now use their health spending accounts to cover costs associated with male reproductive health. By understanding and incorporating these changes into your organization's health benefits strategy, you can provide employees with the resources they need to manage their health effectively.

HealthEquity will be updating the searchable qualified medical expenses list for HSAs, FSAs, HRAs, and more.

Please note, this is a general summary to help educate you on how the IRS guidance impacts employee benefit plans. It's not and should not be construed as legal or tax advice. As always, HealthEquity strongly encourages employers and plan sponsors to consult competent legal or benefits counsel for all guidance on how the actions apply in their specific circumstances.

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