Preventative Care Updates: IRS and ACA Issue New Guidance

Both the IRS and the three agencies tasked with issuing rules under the Affordable Care Act (“ACA”) have released guidance on new items considered preventive and medical care, as well as some further requirements around existing items plans are required to cover. Some of the guidance related to high deductible health plans (“HDHPs”) is effective retroactively presumably because some HDHPs may have already covered those items believing them to be preventive care.

Additional Medical and Preventive Care

In IRS Notice 2024-71, the IRS created a safe harbor stating that male condoms will be considered medical care for tax purposes. Among other results, this means that health plans, health flexible spending arrangements (“Health FSAs”), health reimbursement arrangements (“HRAs”), and health savings accounts (“HSAs”) can pay for or reimburse the cost of male condoms on a tax-free basis. The notice doesn’t specify an effective date, but presumably it is effective immediately.

However, for them to be preventive care for purposes of high deductible health plans and HSA purposes, separate guidance is required. As a reminder, for an individual to contribute to an HSA, they must be covered by a HDHP and not be covered by other non-permitted health insurance. Therefore, even though the IRS has now said that male condoms are medical care, they cannot be covered before the deductible under an HDHP without additional guidance.

Fortunately, the IRS also issued Notice 2024-75. It includes that needed guidance and some other items as well. Specifically, HDHPs can now cover the following items as preventive care before the individual satisfies the deductible:

• Oral contraceptives that are available over the counter, no prescription required, including emergency contraception. This change is effective for plan years beginning on or after December 30, 2022.
• Male condoms. No prescription is required. This is also effective for plan years beginning on or after December 30, 2022.
• Breast cancer screenings other than mammograms (such as MRIs or ultrasounds). This change is effective April 12, 2004 (the date prior guidance on this topic was issued).
• Continuous glucose monitors, if they pierce the skin. This change means that smartwatches or smartrings are not considered preventive care. Additionally, if the glucose monitor provides additional medical functions, like insulin delivery or non-medical functions, then these features would also need to be preventive care to be covered pre-deductible. That distinction means that some continuous glucose monitors can be treated as preventive care pre-deductible, but others that provide additional substantial non-medical functions likely will not. This change is effective July 17, 2019, the date prior guidance on continuous glucose monitors was issued.
• Insulin products without regard to whether they are prescribed to treat someone diagnosed with diabetes or prescribed to prevent the exacerbation of diabetes. This was a change in response to changes in the tax code under the Inflation Reduction Act. This is effective for plan years beginning on or after December 31, 2022.

The retroactive dates were presumably intended to address concerns that plans had already covered some of these items. However, to be clear, HDHPs are not required to cover these items pre-deductible, but this guidance allows them to do so without affecting a participant’s ability to contribute to an HSA.

FAQs part 68

In addition, the Departments of Health and Human Services, Labor, and Treasury issued guidance on some existing items plans are required to cover in their sixty-eighth edition of ACA FAQs.

For plans subject to the Women’s Health and Cancer Rights Act (“WHCRA”), the FAQs clarify that plans are required to cover chest wall reconstruction with an aesthetic flat closure, if elected by the patient in consultation with the attending physician. Under WHCRA, plans are generally required to cover reconstruction of the breast on which a mastectomy was performed, and surgery and reconstruction of the other breast to produce a symmetrical appearance. The guidance now confirms that this requirement includes providing an aesthetic flat closure, where extra tissues in the breast area are removed, and the remaining tissue is tightened and smoothed out to create a flat chest wall. Most plans are subject to WHCRA, including governmental plans, unless they are self-funded and have opted out. Church plans that have elected not to be subject to ERISA are not subject to WHCRA.

The FAQs address some common coding practices for items that are deemed to be medical care. The specifics and nuances of this guidance are more relevant to carriers or third party administrators (“TPAs”). However, in general, if an item is coded as preventive, it should be treated as such unless there’s additional information in the claim that would lead the plan or carrier to believe it should not be treated as preventive. If an item or service is not covered as preventive when it should be, participants and beneficiaries have the right to appeal under the relevant plan claims procedures.

Takeaways

Employers should work with their insurance carriers and TPAs to determine whether and how they plan to cover the additional permitted items for health FSAs, HRAs, and HDHPs. They should also address the coverage of the additional mandatory items from the FAQ guidance. Changes to plan documents, summary plan descriptions, or other communications may be required.