IRS Expands HSA Benefits for Chronic Conditions

IRS Expands List of Preventative Care for Chronic Conditions Eligible for HSA Benefits

The IRS has issued guidance on health savings accounts (HSAs) that expands the list of preventive care for HSA participants for certain care for chronic conditions that can be provided under a high deductible health plan. The Treasury Department and the IRS, in consultation with the Department of Health and Human Services, developed the list of services and items necessary for preventative care of certain chronic conditions [Notice 2019-45, 2019-32 IRB, IR-2019-129, 7/17/19].

Background. An HSA is a trust created or organized exclusively for the purpose of paying the qualified medical expenses of an account beneficiary. An HSA can only be established for the benefit of an “eligible individual” who is covered under a “high deductible health plan” (HDHP). Employer contributions to an HSA on an employee’s behalf are neither included in the employee’s income nor subject to employment taxes. Eligible individuals may, subject to statutory limits, make contributions to HSAs, and employers as well as other persons also may contribute (subject to maximum annual limits, see Payroll Guide ¶3408) on behalf of eligible individuals [Code Sec. 106; Code Sec. 223]. Code Sec. 223(d)(1)(E)provides that the interest of an individual in the balance in an HSA is nonforfeitable.

Preventative care. Generally, an HDHP is not permitted to provide benefits before the deductible is satisfied. However, the is an exception for preventative care Notice 2004-23 provides a safe harbor list of benefits can be provided by a HDHP (see Payroll Guide ¶3408).

Notice 2019-45. The notice expands the list of preventative care services and items for chronic conditions such as osteoporosis, coronary artery disease, congestive heart failure, hypertension, asthma, diabetes, liver disease, heart disease, and depression.

The list of preventative care services and items were expanded to address the problem of individuals with chronic conditions that fail to seek preventative care services and items due to cost.