Employers Get HSA/HDHP Coverage Guidance

March 30, 2004 (PLANSPONSOR.com) - Employers offering a Health Savings Account (HSA) tied to a high deductible health plan (HDHP) got a bit of guidance on Tuesday dealing with the types of services they can cover.

The US Treasury Department and the Internal Revenue Service (IRS) issued a series of guidance statements including one setting out the types of preventative-care services that can be covered without running afoul of laws governing the extent to which coverage can kick in before a plan’s deductible/co-pay rules are satisfied. HSAs can only be established by eligible individuals, who must have coverage by a high deductible health plan (HDHP).   Generally, an HDHP cannot provide benefits before the deductible is satisfied, but there is an exception for benefits for preventive care, according to officials.

According to the notice,  http://www.treas.gov/press/releases/reports/notice200423.pdf, an HDHP can provide a variety of preventive care benefits such as annual physicals, immunizations and screening services as well as routine prenatal and well-child care, tobacco cessation programs and obesity weight-loss programs. The guidance also clarifies that preventive care generally does not include treatment of existing conditions


“We want to make it easy for those designing HSAs to comply with the rules and help consumers understand how HSAs can help them meet their health care needs, ” Acting Assistant Secretary Gregory Jenner said in a statement. “The industry asked for more specific guidance on what is allowed as preventive care under a high deductible health plan and for clarification of the allowable interaction between the HDHP and prescription drug benefits.   Today we are delivering

that guidance, and hope that those providing high deductible health plans and those marketing HSAs will be able to make HSAs available to all consumers as quickly as possible.”

Asserted officials in the guidance statement: “The safe harbor provides employers and plans with the flexibility in designing health benefits, allowing them to provide preventive care benefits that reduce health costs and encourage early identification of health conditions that may require medical attention.”

Also, in a separate guidance statement,  http://www.treas.gov/press/releases/reports/notice200425.pdf

officials said HSA distributions for medical expenses incurred between the date on or after January 1, 2004 that an individual becomes an eligible individual (is covered by a HDHP, etc.) and the date on or before April 15, 2005 that the individual establishes his or her HSA will be tax-free if the various HSA requirements are met.

Other guidance issued Tuesday included:

  • A clarification that individuals covered by a health plan that provides prescription drug benefits before the minimum annual deductible of an HDHP has been satisfied may not make contributions to an HSA. http://www.treas.gov/press/releases/reports/rev.rul200438.pdf
  • Transition relief for those covered by a HDHP who would be eligible individuals but for the fact that they are covered by a prescription drug plan that provides benefits before the deductible of the HDHP is satisfied. Under the transition relief, for 2004 and 2005 such individuals will be considered to be eligible individuals who can contribute to an HSA.  http://www.treas.gov/press/releases/reports/rev.proc200422.pdf