HSA BASICS:
PREVENTIVE CARE EXCEPTIONS
IRS has provided exceptions to the HDHP requirements for preventive care. Code § 223(c)(2)(C) states that a HDHP that applies either no or a low deductible for preventive care coverage does not fail to qualify as an eligible HDHP (if otherwise eligible).
IRS Notice 2004-23 (March 30, 2004) defines the preventive care that qualifies under this exception. Under this notice, he acceptable 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 (A list of the acceptable screening services are listed in the IRS Notice 2004-23 Appendix).
The Notice also states that preventive care generally does not include services or treatments intended to treat an existing illness, injury, or condition. Under this statement, it seems that disease management programs geared toward specific conditions will not qualify as permitted preventive care.
Note that when determining whether or not treatment constitutes "preventive care" under Code § 223(c)(2)(C), you need to make the determination based on IRS guidance, not on state-mandated coverage. However, IRS has given transition relief until January 1, 2006, for state-mandated coverage in effect as of January 1, 2004. After January 1, 2006, if state-mandated coverages are not considered preventive care under IRS guidance, it may be difficult to obtain HDHP coverage in those states unless changes are made to the state mandates.
IRS Notice 2004-50 (July 23, 2004) provides additional guidance that a preventive care service or screening that also includes the treatment of a related condition during that procedure will qualify as preventive care, if “it would be unreasonable or impracticable to perform another procedure to treat the condition”. The Notice gives the example that “removal of polyps during a diagnostic colonoscopy is preventive care that can be provided before the deductible in an HDHP has been satisfied”.
Notice 2004-50 also states that drugs or medications are preventive care “when taken by a person who has developed risk factors for a disease that has not yet manifested itself or not yet become clinically apparent (i.e., asymptomatic), or to prevent the reoccurrence of a disease from which a person has recovered”. As examples, the Notice gives (1) the treatment of high cholesterol with cholesterol-lowering medications (to prevent heart disease), (2) the treatment of recovered heart attack or stroke victims with ACE inhibitors, and (3) drugs or medications used as part of permitted care services stated above in Notice 2004-23 (including obesity weight-loss programs and tobacco-cessation programs).
Watch next month for more information on Health Savings Accounts.