IRS Expands HSA Preventive Care Safe Harbor to Include Chronic Conditions
EEOC Delays Amending Wellness Program Regulations to End of 2019
On June 24, 2019, President Trump issued an Executive Order intending to develop price and quality transparency initiatives to ensure that healthcare patients can make well-informed decisions about their care. This is part of the consumer-driven healthcare initiative, which has been a focus of government and patient groups alike to have more transparency regarding the cost of services from hospitals and other healthcare providers, as well as expanding the ability to use certain pre-tax health spending arrangements. The goal is to help consumers to make better informed decisions regarding their healthcare. It is also intended to address so-called “surprise billing,” which can expose patients to unexpected medical bills. The Executive Order directs federal agencies to promulgate regulations and issue guidance to meet these objectives.
Transparency in Prices
The Executive Order instructs the Department of Health and Human Services (HHS) to promulgate regulations requiring hospitals to publicly post standard price information for services rendered in an easy-to-read format. The regulations should mandate the disclosure of standard charge information for services, supplies, and any other fees that apply to the hospital and its employees. HHS may also use the Executive Order to create regulations for other providers and self-funded health plans to also post standard costs for services and supplies. The objective of such disclosure is to allow patients to make more informed decisions about the cost of services and goods if the patient goes to a certain healthcare facility. If a patient understands the cost and quality of services, they could avoid unexpected costs. It could also facilitate further analysis regarding the cost differentials between facilities and providers. The standard costs posted must be regularly updated, in order to provide accurate, up-to-date pricing. The Executive Order also requires the agencies to monitor the hospitals, providers, and plans for compliance.
Increased Access to Healthcare Information
The Executive Order directs applicable agencies to increase de-identified claims data to give researchers, providers, and other parties more information and access to taxpayer-funded healthcare programs. Such parties could create better educational materials for consumers by being able to access more aggregated public data.
Enhancing Patient Control over Healthcare
This provision of the Executive Order directs the Secretary of Treasury to propose regulations to help patients who have high deductible health plans (HDHPs). Part of the guidance would allow HDHPs to cover low-cost preventive care, before the deductible, for medical care that helps maintain health status for individuals with chronic conditions. Currently, drugs or medications used to treat other existing illnesses, injuries, or conditions are not considered permitted “preventive care” for Health Savings Account (HSA) purposes.
The directive also includes expanding the definition of eligible medical expenses under the Internal Revenue Code to include expenses related to certain types of arrangements, such as direct primary care and healthcare sharing ministries. Furthermore, the carryover allowance for health flexible spending arrangements would also be increased, from the current $500 limit. This could enable consumers to better reserve pre-tax money to help further fund their own healthcare costs.
Surprise Billing
Building upon the proposals already occurring in federal agencies and Congress, the Executive Order further directs the agencies to report to the President any additional steps that can be taken to help control surprise billing issues. Surprise billing often occurs when an individual goes to a facility that is in-network with his or her plan, but a provider giving certain services is not part of the facility contract. This means that the patient could be charged for out-of-network provider services because it is not covered under their health plan, regardless of the facility being in-network. The patient is then responsible for an unexpected bill. Some of the previously proposed changes for surprise billing include changes to out-of-network reimbursement when a facility is in-network under the health plan, especially for emergency services.
Current Impact on Employers
The Executive Order does not make any changes to existing regulations; it directs agencies to propose and create regulations associated with the Executive Order. Employers, plan sponsors, and administrators should be ready to implement new changes as they occur in the future. Consumers, plan sponsors, and employers alike may benefit from these regulations as the increase of information provides further education to plan participants and help them make more well-informed decisions concerning their healthcare.
IRS Expands HSA Preventive Care Safe Harbor to Include Chronic Conditions
On July 17, 2019, the Internal Revenue Service (IRS) released Notice 2019-45, which expands the definition of preventive care benefits that can be provided by a high deductible health plan (HDHP) to include certain chronic conditions. The guidance in the Notice may be relied upon immediately. In general, most HDHP participants may establish and contribute to a health savings account (HSA), unless there is disqualifying coverage—such as having other medical benefits available besides preventive care before the minimum annual deductible is satisfied.
Overview
Under Section 223(c) of the Internal Revenue Code (Code), an HSA-qualified HDHP is not required to impose a deductible for certain preventive care services. This preventive care safe harbor includes services such as annual physicals, well-child care, and immunizations. Notably, prior to the Notice, preventive care did not include any service to treat existing illnesses, injuries, or conditions. Likewise, drugs or medications were treated as preventive care only when taken by a person who has developed risk factors for a disease that has not yet manifested itself or has not yet become clinically apparent (i.e., the individual is asymptomatic) or when the drugs are taken to prevent the recurrence of a disease from which a person has recovered.
Ultimately, the goal of the preventive care safe harbor is to encourage HDHP participants to receive routine care with a lower cost barrier, which should lead to better health outcomes. By expanding the list of medical services that can be classified as preventive care, the IRS recognizes that cost barriers for care have resulted in some individuals with certain chronic conditions failing to seek care that would prevent exacerbation of their condition, which can lead to consequences such as amputation, blindness, heart attacks, and strokes that require considerably more extensive medical intervention.
In the Notice, the IRS expands the definition of preventive care to include coverages for specific chronic illnesses, in order to encourage necessary care and mitigate the consequences of not receiving care. It is also pursuant to President Trump’s executive order released on June 24, 2019, which instructs the agencies to allow HSAs to cover other low-cost preventive care to help maintain health statuses of participants with chronic illnesses. Such conditions will be considered preventive care only if the care is for one of the conditions listed below, and only when the care occurs for the purpose of preventing exacerbation of the condition or development of a new, secondary condition. Any care, services, or conditions not listed within the Notice (or other IRS guidance) will not be treated as preventive care and will not be permitted under the preventive care safe harbor.
Preventive Care under Code Section 223 now includes the following care and conditions:
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Impact on Employers and Plan Participants
Employers and plan sponsors that offer an HSA-qualified HDHP, and their participating employees, should understand which conditions and services are now included under the preventive care definition. While use of the expanded safe harbor is voluntary, we expect that many plans will adopt it. The expanded safe harbor could benefit employers—especially those with self-funded plans—and allow for further cost-savings by covering chronic illnesses before a deductible is met.
EEOC Delays Amending Wellness Program Regulations to End of 2019
On May 22, 2019, the Equal Employment Opportunity Commission (EEOC) announced its plans to issue amended regulations related to wellness program incentives by December 2019. This signals the second pushback of the EEOC’s deadline to publish new wellness program incentive regulations.
Back in 2016, the EEOC had finalized two rules that regulated employer-sponsored wellness programs. These rules allowed employers to offer incentives for wellness programs that asked employees health-related questions or included medical exams.
The rules also allowed employers to offer incentives in exchange for health-related information about employees’ spouses. In August 2017, a federal district court had vacated portions of the final rules, and required the EEOC to revise the incentive limit portion of the rules. Effective Jan. 1, 2019, the EEOC removed the incentive limits from the final rule.
Until new regulations are issued, employers should carefully review their wellness programs to ensure compliance.
