The IRS has increasingly broadened what qualifies as preventive care that can be covered before the minimum deductible is satisfied under an HDHP without affecting HSA eligibility. Although these changes create additional opportunities for plan design innovation, employers should understand that, beyond ACA-required preventive services, providing coverage without cost-sharing for these additional items and services is optional.

 

HSA Eligibility Rules

To be eligible to contribute to an HSA, an individual:

• Must be enrolled in a qualifying high-deductible health plan (HDHP);
• May not have any other “disqualifying coverage”; and
• Cannot be claimed as a tax dependent by another individual.

Most medical coverage available to an individual prior to meeting the statutory HDHP deductible ($1,650 for single/$3,300 for family in 2025) will cause HSA ineligibility. So, for example, coverage under a non-HDHP, a general-purpose health FSA or HRA, or Medicare would make an individual ineligible to contribute to an HSA. There is an exception for preventive care, as well as for permitted insurance and permitted coverage. Individuals who have such coverage prior to meeting the minimum statutory HDHP deductible remain eligible to contribute to an HSA.

• Permitted insurance includes:
  • Insurance in which substantially all of the coverage relates to liabilities incurred under workers’ compensation laws; tort liabilities; liabilities relating to ownership or use of property (e.g., homeowner or auto insurance); or similar liabilities as specified by the IRS;
  • Insurance for a specified disease or illness (e.g., cancer insurance); and
  • Insurance that pays a fixed amount per day (or other period) of hospitalization (e.g., hospital indemnity insurance).
• Permitted coverage includes coverage for accidents, disability, dental care, vision care, or long-term care.
• Preventive care, the definition of which is expanded by this latest IRS guidance, is described below. 

 

Preventive Care

To be preventive care for purposes of HSA-eligibility, the benefit must either be described as preventive care for purposes of §1861 of the Social Security Act (SSA) or as determined in guidance issued by the Internal Revenue Service (IRS). Preventive care generally does not include any service or benefit intended to treat an existing illness, injury, or condition.

IRS Notice 2004-23

IRS Notice 2004-23 (https://www.irs.gov/pub/irs-drop/n-04-23.pdf) indicates that preventive care includes, but is not limited to, the following:

• Periodic health evaluations, including tests and diagnostic procedures ordered in connection with routine examinations, such as annual physicals.
• Routine prenatal and well-child care.
• Child and adult immunizations.
• Tobacco cessation programs.
• Obesity weight-loss programs.
• Screening services (more detail in the notice)

The notice also clarifies that coverage without cost-sharing required by state law but not otherwise defined as preventive care by the IRS, may interfere with HSA-eligibility.

IRS Notice 2004-50

IRS Notice 2004-50, Q&A #27 (https://www.irs.gov/pub/irs-drop/n-04-50.pdf) indicates that drugs or medications are preventive care when taken by a person who has developed risk factors only for a disease that has not manifested itself or become clinically apparent, or to prevent the recurrence of a disease from which a person has recovered.

Affordable Care Act (ACA)

Preventive care for HSA-eligibility includes any recommended preventive services required to be covered with no cost-sharing by the ACA. Under the ACA (PHSA §2713), non-grandfathered group health plans are required to provide the following in-network preventive services without imposing any copayments, coinsurance, deductibles, or other cost-sharing requirements:

• Evidenced-based items or services that have in effect a rating of “A” or “B” in the current recommendations of the United States Preventive Services Task Force (USPSTF) with respect to the individual involved;
• Immunizations for routine use in children, adolescents, and adults that have in effect a recommendation from the Advisory Committee on Immunization Practices (ACIP) of the Centers for Disease Control and Prevention (CDC);
• With respect to infants, children, and adolescents, evidence-informed preventive care and screenings provided for in the comprehensive guidelines supported by the Health Resources and Services Administration (HRSA); and
• Evidence-informed preventive care and screening provided for in comprehensive guidelines supported by HRSA for women.

ACA Preventive Services versus HSA Preventive Care The definition of preventive services for ACA purposes is different than the definition of preventive care for HSA-eligibility. Preventive care for HSA-eligibility is broader and includes all ACA preventive care and more. When the IRS expands the definition of preventive care for HSA-eligibility, it does not require that all non-grandfathered group health plans expand what must be covered with no cost-sharing to meet ACA’s requirements; group health plans are only required to cover preventive services as defined by the ACA with no cost-sharing.

 

IRS Notice 2019-45

While preventive care generally does not include any service or item intended to treat an existing illness, injury, or condition, in an effort to encourage treatment for some chronic illnesses, IRS Notice 2019-45 (https://www.irs.gov/pub/irs-drop/n-19-45.pdf) expanded the definition of preventive care to include certain medical care services and items when prescribed to treat an individual diagnosed with the associated chronic condition, but only when prescribed for the purpose of preventing the exacerbation of the chronic condition or the development of a secondary condition. These are described in the table below.

Medical Carer Services or Items	For Individual Diagnosed With:
Angiotensin Converting Enzyme (ACE) inhibitors	Congestive heart failure, diabetes, or coronary artery disease
Anti-resorptive therapy	Osteoporosis or osteopenia
Beta-blockers	Congestive heart failure or coronary artery disease
Blood pressure monitor	Hypertension
Inhaled corticosteroids	Asthma
Insulin and other glucose-lowering agents	Diabetes
Retinopathy screening	Diabetes
Peak flow meter	Asthma
Glucometer	Diabetes
Hemoglobin A1C testing	Diabetes
International normalized ratio (INR) testing	Liver disease and/or bleeding disorders
Low-density lipoprotein (LDL) testing	Heart disease
Selective serotonin reuptake inhibitors (SSRIs)	Depression
Statins	Heart disease or diabetes

 

The IRS used the following criteria to identify which services and items were put on the list in the table above:

• The service or item is low-cost;
• There is medical evidence supporting high-cost efficiency (a large, expected impact) of preventing exacerbation of the chronic condition or the development of a secondary condition; and
• There is a strong likelihood, documented by clinical evidence, that with respect to the class of individuals prescribed the item or service, the specific service or use of the item will prevent the exacerbation of the chronic condition or the development of a secondary condition that requires significantly higher cost treatments.

Services or items that meet these criteria but are not on the list are not treated as preventive coverage. However, this list will likely change over time. Guidance indicates the agencies will review and update the list periodically (every 5–10 years).

IRS Notice 2024-75

IRS Notice 2024-75 (https://www.irs.gov/pub/irs-drop/n-24-75.pdf) expanded preventive care for HSA-eligibility to include the following:

• OTC oral contraceptives including, but not limited to, OTC birth control pills and emergency contraception, regardless of whether they are purchased with a prescription; and
• Male condoms, regardless of whether they are purchased with a prescription and regardless of the gender of the individual who purchases them.

In addition, the notice clarifies that the following are preventive care for HSA-eligibility:

• Breast cancer screenings include mammograms, magnetic resonance imaging (MRIs), ultrasounds and similar breast cancer screening services;
• Continuous glucose monitors measuring glucose levels using a similar detection method or mechanism to other glucometers (i.e., piercing the skin), as well as continuous glucose monitors that both monitor and provide insulin; and
• Any dosage form (such as vial, pump, or inhaler dosage forms) of any different type (such as rapid-acting, short-acting, intermediate-acting, long-acting, ultra long-acting, and premixed) of insulin, as well as any devices used to administer or deliver such insulin products.

Apex Benefits is not a law firm and cannot dispense legal advice. Anything contained in this communication is not and should not be construed as legal advice. If you need legal advice, please contact your legal counsel.