The Upshot
- In Notice 2024-75, the IRS permits HDHPs to provide pre-deductible coverage of certain over-the-counter contraceptives, male condoms, continuous glucose monitors, insulin, and breast cancer screening services.
- In Notice 2024-71, the IRS expands the benefits available under tax-favored spending accounts to include condoms.
The Bottom Line
Employers that offer health benefits, and particularly those that sponsor an HDHP, health savings account (HSA), health flexible spending arrangement (FSA) or health reimbursement arrangement (HRA) should consider the extent to which these products and services will be covered and incorporate any updates into plan documents, participant communications, and any related systems.
Attorneys in Ballard Spahr’s Employee Benefits and Executive Compensation Group and Health Care Group can help employers, plan fiduciaries, plan service providers, and health care providers navigate this new IRS guidance.
On October 17, 2024, the Internal Revenue Service (IRS) issued Notices 2024-71 and 2024-75, which expand the list of “preventive care” benefits permitted to be provided by a high deductible health plan (HDHP) without a deductible and the list of benefits considered “medical care expenses” under group health plans.
As background, an individual is eligible to contribute to a tax-favored HSA if the individual is covered under an HDHP, with no disqualifying health coverage. HSA-compatible HDHPs are not permitted to provide benefits until the minimum deductible for that year is satisfied, other than in a few limited situations. One of the key exceptions to this rule is Section 223(c)(2)(C) of the Internal Revenue Code (Code), which allows plans to provide preventive care before the individual meets the minimum deductible. Over the years, the IRS has issued guidance to clarify what does and does not constitute preventive care. Notices 2024-75 and 2024-71 expand on that guidance.
IRS Notice 2024-75 expands the list of preventive care benefits that can be offered on a first-dollar basis without disqualifying HSA contributions:
- Over-the-counter (OTC) oral contraceptives, including OTC birth control pills and emergency contraceptives, for a participant potentially capable of becoming pregnant (effective for plan years beginning on or after December 30, 2022);
- Male condoms, regardless of the gender of the covered individual who purchases them (effective for plan years beginning on or after December 30, 2022);
- All types of breast cancer screening (not only mammograms, but also MRIs, ultrasounds, and similar breast cancer screening services) for individuals who have not been diagnosed with breast cancer (effective as of April 12, 2004, which is the date the related Notice 2004-23 was published);
- Certain continuous glucose monitors for individuals diagnosed with diabetes (effective as of July 17, 2019, which is the date the related Notice 2019-45 was published); and
- Certain insulin products that are prescribed to treat diabetes or to prevent the development of a secondary condition (effective for plan years beginning on or after December 30, 2022).
The IRS also issued Notice 2024-71, which provides a safe harbor that treats amounts paid for condoms as amounts paid for medical care under Section 213(d) of the Code. As a result, amounts paid for condoms are eligible to be paid or reimbursed under a health flexible spending account (FSA), health reimbursement arrangement (HRA), or HSA.
The Biden Administration followed this guidance with a proposed regulation that would require non-grandfathered group health plans to cover OTC contraceptives - including oral contraceptives, condoms, and emergency contraception - without cost-sharing and without a prescription. As background, the Affordable Care Act’s (ACA) preventive care mandate requires non-grandfathered group health plans to cover, without participant cost-sharing, the following:
- Preventive items or services that receive an “A” or “B” recommendation by the United States Preventive Services Task Force (USPSTF);
- preventive care and screenings for infants, children, adolescents, and women that are in the guidelines released by the Health Resources and Services Administration (HRSA); and
- immunizations recommended by the Advisory Committee on Immunization Practices (ACIP).
Currently, the ACA mandates cost-free coverage of OTC contraceptives only if they are prescribed by a health care provider. The proposed rule, if finalized, would expand the ACA mandate to include OTC contraceptives without a prescription. The recent election results make it very uncertain whether these proposed regulations will become final.
The Biden Administration also issued a new set of FAQs on how to address certain coding requirements under the preventive care rules and reminding health plan sponsors that their plans need to provide first dollar coverage, without cost-sharing, for an expanded set of HIV-preventive medications.
Attorneys in Ballard Spahr’s Employee Benefits and Executive Compensation Group and Health Care Group can help employers, plan fiduciaries, plan service providers, and health care providers navigate this new IRS guidance.
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