The Treasury Department and the Internal Revenue Service recently clarified the types of preventive care benefits that are covered by high-deductible health plans that qualify under the new Health Savings Accounts (HSAs). The guidance also clarifies the interaction between a high-deductible plan and other prescription drug benefits. In addition, Treasury and the IRS have issued “transitional relief for the prescription coverage interaction” as well as “allowing HSAs to reimburse medical expenses incurred” after a high-deductible plan is set up.
The new guidance provides a safe harbor list of preventive care benefits that can be provided by a high-deductible plan, including annual physicals, immunizations and screening services, routine prenatal and well-child care, tobacco cessation, and obesity weight-loss programs. Existing medical conditions are not included in preventive care. Treasury and IRS are still taking comments on whether other benefits–like certain drug cost benefits provided by employee assistance programs, mental health, or wellness programs–should qualify as preventive care.
The new guidance also says that “individuals covered by a health plan that provides prescription drug benefits before the minimum annual deductible of a high-deductible plan has been satisfied may not make annual contributions to an HSA.” However, transition relief is provided to individuals covered by both a high-deductible plan and another health plan or rider “that provides prescription drug benefits before the deductible of the high-deductible plan is satisfied.” Under the transition relief, these individuals are eligible to contribute to HSAs before 2006.
Prior guidance allowed HSAs to only reimburse medical expenses after the HSA was established. Under the new rules, for 2004, “an HSA established by an eligible individual on or before April 15, 2005, may reimburse expenses incurred on or after the later of January 1, 2004, or the first day of the first month that the individual became and eligible individual.”