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IRS Clarifies Impact of Preventive Care Services on HDHPs

The IRS has provided an expected, but welcome, clarification (see Notice here) regarding the impact of providing no-cost preventive care services under a high-deductible health plan. 

Background. To be eligible to contribute to a health savings account (HSA), an individual must be covered under a qualifying high-deductible health plan (HDHP) and must not be covered under any low-deductible coverage, other than permitted coverage. Permitted coverage incudes coverage for preventive care services within the meaning of Internal Revenue Code Section 223(c)(2)(C). 

Health Care Reform. Under health care reform, non-grandfathered health plans are required to offer specified preventive care services without cost sharing. This rule applies to non-grandfathered plans that otherwise meet the requirements to be an HDHP. But the preventive care services required under health care reform are not quite the same as preventive care services described in guidance under Code Section 223(c)(2)(C). And, of course, there cannot be a deductible. So we have wondered: Will compliance with the preventive care mandate under health care reform risk causing a plan to no longer qualify as an HDHP?

Guidance. The assumption has been that the IRS would not view preventive care services provided in accordance with health care reform as impermissible low-deductible coverage. Otherwise HDHPs could effectively no longer exist, unless they remained grandfathered.

That assumption has now been confirmed: "[A] health plan will not fail to qualify as an HDHP under section 223(c)(2) of the Code merely because it provides without a deductible the preventive care health services required under section 2713 of the PHS Act to be provided by a group health plan or a health insurance issuer offering group or individual health insurance coverage."



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Don Berner, the Labor Law, OSHA, & Immigration Law Guy
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Boyd Byers, the General Employment Law Guy
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Jason Lacey, the Employee Benefits Guy
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