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IRS expands preventive care benefits for HDHPs

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Tax Hot Topics newsletterThe IRS issued guidance in Notice 2019-45 expanding the list of preventive care benefits permitted to be provided by a high deductible health plan (HDHP) without a deductible, or with a deductible below the applicable minimum deductible for HDHPs.

The guidance comes in response to Executive Order 13877 issued by President Donald Trump on June 24. Among other provisions, the executive order directed the IRS and Treasury Department to consider proposing amendments to expand the ability of patients to select HDHPs that can be used alongside Health Savings Accounts (HSAs), and that cover low-cost preventive care, before the deductible, that helps maintain health status for individuals with chronic conditions.

Under Section 223, an HDHP (for HSA purposes) may not provide benefits for any year until the minimum deductible for that year is satisfied. However, an HDHP may provide preventive care benefits without a deductible, or with a deductible below the applicable minimum deductible for HDHPs. The IRS clarified the definition of preventive care in Notice 2004-23, which provides that preventive care generally does not include any service or benefit intended to treat an existing illness, injury, or condition.

In response to the executive order and in consultation with the Department of Health and Human Services (HHS), the IRS determined that certain medical care services received and items purchased, including prescription drugs, for certain chronic conditions should be classified as preventive care. Notice 2019-45 provides an appendix of medical services and items that qualify as preventive care. However, services or items that are not listed in the appendix may not be treated as preventive care.
Notice 2019-45 is effective as of July 17, 2019.

Contacts:
Jeff Martin
Partner
Washington National Tax Office
T +1 202 521 1526

Keith Mong
Managing Director
Washington National Tax Office
T +1 202 521 1554

James Sanchez
Senior Associate
Washington National Tax Office
T +1 202 861 4107

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