IRS issues HDHP / HSA guidance; House votes to repeal Cadillac tax

The IRS rolled out new rules that could have major implications for people who have chronic diseases, but are also on the hook for thousands of dollars in medical bills. Notice 2019-45 expands the list of preventive care benefits that can be provided by a high deductible health plan (HDHP), on a no-deductible or low-deductible basis, without any adverse effect on HSA eligibility.

In general, “preventive” care does not include treatment for existing illnesses or conditions. Under the current HDHP/HSA rules, treatments of a non-preventive nature that are covered or reimbursed by a health plan without first satisfying HDHP conditions would generally disqualify a covered individual from HSA contribution eligibility.

However, the Administration now acknowledges 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. Thus, these regulations are aimed at encouraging individuals to take more responsibility for their health care spending and become better health care consumers.

According to the notice, for services to be covered by an HDHP pre-deductible, 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 condition worsening or the development of another serious medical issue. Those services and items, along with the conditions for which they must be prescribed to qualify as preventive care, are listed in an appendix to the guidance. The list includes 14 medical services or items for individuals with 11 specified chronic conditions (such as diabetes and high blood pressure).

While this new guidance is effective immediately, Treasury and HHS will periodically review the list to determine whether additional services or items should be added or removed. This exercise is expected to occur every five to ten years in an effort to promote stability and avoid confusion by participants in, or sponsors or providers of, HDHP arrangements.

Full text:  https://www.irs.gov/pub/irs-drop/n-19-45.pdf

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House Democrats and Republicans joined together in a rare show of unity last week, voting overwhelmingly (419-6) to repeal the ACA’s “Cadillac” tax on high cost health plans.

Delayed repeatedly by Congress, the tax would slap a 40% levy on the value of employer-provided health benefits that exceed $11,200 for individual coverage and $30,100 for family policies beginning in 2022. The idea was to reduce soaring health-care costs by discouraging employers from offering such generous plans.

Insurers and employers (like TASC) oppose the tax because they’d be the ones most exposed to its bite…shifting more costs to policyholders/employees as a result. About 160 million Americans are covered by workplace plans, still the largest source of coverage.

The House vote was aided by a new expedited procedure designed to force votes on measures that have wide bipartisan support (i.e. two-thirds majority). The 350+ cosponsors of HR 748 – titled the Middle Class Health Benefits Tax Repeal Act – not only include conservative Republicans, but members of the progressive wing of the Democratic Party as well…many of whom have championed replacing the current employer-based system with a “Medicare for All’ structure.

It’s unclear whether the Senate will tackle repeal, although a companion bill sponsored by Sen. Mike Rounds (R-SD) has collected 42 cosponsors.