Employee Benefits Compliance, Preventive Services

IRS Notice 2013-57 Clarifies that HDHPs can Provide First-Dollar Coverage of Preventive Care

IRS Notice 2013-57 (issued September 9, 2013) clarifies that a high deductible health plan (HDHP) will not fail to qualify as an HDHP under IRC section 223(c)(2) merely because it provides –without a deductible—the preventive care services required under section 2713 of the Public Health Service Act (PHS Act).  These are the preventive care services that the Affordable Care Act (ACA) requires to be offered by all group health plans and health insurance issuers offering group or individual health insurance coverage.

Why This Was a Potential Issue

IRC section 223 permits “eligible individuals” to establish Health Savings Accounts (HSAs). Among the requirements for an individual to qualify as an eligible individual under section 223(c)(1) (and thus to be eligible to make, or for the individual’s employer to make on their behalf, tax-favored contributions to a HSA) is that the individual be covered under a HDHP and have no disqualifying health coverage. A HDHP is a health plan that satisfies certain requirements with respect to minimum deductibles and maximum out-of-pocket expenses.

Generally, under section 223(c)(2)(A), a HDHP may not provide benefits for any year until the minimum deductible for that year is satisfied. However, IRC section 223(c)(2)(C) provides a safe harbor for the absence of a deductible for preventive care.  Section 223(c)(2)(C) predates the ACA, so the safe harbor it offers does not specifically refer to preventive services under PHS Act 2713, which was added by the ACA.  Instead, it states that a HDHP may provide “preventive care (within the meaning of section 1871 of the Social Security Act, except as otherwise provided by the Secretary).”

Notice 2013-57 clarifies that the Secretary allows HDHPs to provide “preventive care” withing the meaning of PHS Act 2713, as well as within the meaning of section 1871 of the Social Security Act.