Managing Today's Retirement

IRS Expands Threshold On HDHPs With Health Savings Accounts

What IRS 2019-45, which addresses preventive care for chronic conditions, can mean for your clients

by Kevin Robertson

Mr. Robertson is Senior Vice President and Chief Revenue Officer with HSA Bank, responsible for leading the growth strategy and organization. He was also a self-employed business owner for 12 years, managing a large insurance operation with more than 25 separate agency locations, and was a Financial Industry Regulatory Authority (FINRA) Registered Representative and Principal for eight years. Visit

People with chronic health conditions got some good news this summer from an unlikely source – the IRS. A July IRS notice says that individuals may no longer have to meet their full healthcare deductible before accessing critical preventive care, such as insulin for diabetics or inhalers for asthmatics. The notice, IRS 2019-45, isn’t a mandate but it is expected to help the many Americans who suffer from chronic conditions and have a high-deductible health plan (HDHP) with a health savings account (HSA).

The notice gives employers and providers the flexibility to adjust their offerings to better meet the needs of those individuals with chronic conditions and help them stretch their healthcare dollars further. IRS 2019-45 takes aim at an issue that has long plagued many with chronic illnesses. Because they can’t afford the deductible or need to meet it too quickly, conditions that can be managed successfully instead get worse. Employers and plan providers have recognized the issue for years but have been unable to take action. Now they can.

The notice expands the definition of preventive treatments and services for chronic conditions under an HDHP, and allows people to get treatment without a deductible or with cost sharing, below the applicable minimum deductible for an HDHP. Previously, the IRS had maintained that if a health plan provided benefits beneath the deductible limitations of HDHPs, it would have invalidated the ability to contribute to an HSA.

The new guidance has the potential to boost the attractiveness of HDHPs with HSAs and help more people improve health outcomes, have more control over their healthcare spending and maintain HSA eligibility.

What IRS-45 Means for Your Clients

With open enrollment coming up, advisors may want to schedule a conversation with clients to take a fresh look at their health insurance options and evaluate how they affect overall planning, including high healthcare costs in retirement, and saving and investing. The guidance isn’t mandatory, which means it will be up to employers and insurers to decide when and how to implement it. Still, the new criteria could be integrated into plans as early as 2020.

The notice is also particularly timely and important for advisors in light of two factors. First, many of their clients may have chronic conditions. Six in 10 Americans have a chronic disease and 40 percent have two or more, according to the Centers for Disease Control and Prevention. Second, an increasing number may have HDHPs with HSAs. In 2017, enrollment in HDHPs with an HSA rose to 19 percent of adults aged 18–64 with employment-based coverage, up from just 4 percent in 2007. Adults 30-44 had the highest enrollment, at 21 percent, compared to 18 percent of those 45-64, and 17 percent of those 18-29.

With change on the horizon, now is a good time for advisors to reevaluate how their clients with chronic conditions (or family members with these conditions) can benefit from HDHPs with HSAs. With their triple tax savings and other advantages, HSAs can help ensure health and wealth, particularly as people move into retirement. The guidance ensures that people who want to manage their chronic illness can participate in an HDHP and still be eligible to contribute to an HSA.

Qualifying Conditions and an Ounce of Prevention

The need for the change is evident in the notice, which says, “Failure to address these chronic conditions has been demonstrated to lead to consequences, such as amputation, blindness, heart attacks, and strokes that require considerably more extensive medical intervention...

IRS 2019-45 identifies 14 specific treatments and services that may now qualify as preventive services under an HDHP, including diabetes, heart disease, hypertension, asthma, osteoporosis, liver disease, bleeding disorders and depression. Treatments such as beta-blockers and statins for heart conditions, and a blood pressure monitor for hypertension, are all eligible preventive treatments. Previously, Treasury and IRS maintained that preventive care did not include any service or benefit intended to treat an existing illness, injury, or condition. While this list is specifically exhaustive, it helps target some of the most common expenses related to the treatment of these conditions.

The need for the change is evident in the notice, which says, “Failure to address these chronic conditions has been demonstrated to lead to consequences, such as amputation, blindness, heart attacks, and strokes that require considerably more extensive medical intervention.”

Proper preventive care not only improves health outcomes, it can save a great deal of money, boost longevity and help secure a more prosperous retirement. A study by HealthView Services found that a 45-year-old man with high blood pressure who took his medication, maintained a healthy level of physical activity and made small changes, such as reducing salt intake, could save an average of more than $3,600 in annual pre-retirement out-of-pocket healthcare costs, and increase his actuarial longevity by more than two years. Further, investing his savings at a 6 percent rate of return would generate $111,622 at retirement.

Implementation and Market Impact

IRS 2019-45 was effective immediately when it was published in July but adoption of the new guidelines will vary among insurance providers and employers. Still, the expectation is that there will be significant pickup. Employers who don’t currently offer an HSA-qualified HDHP plan may consider adding one with low or no deductibles for preventive services. This would be especially appealing to employees who are managing chronic conditions. It would allow them to potentially receive preventive treatments or services at no cost, or at a lower cost, depending on how their insurance plan or employer decide to cover these services, without jeopardizing their ability to contribute to an HSA.

Employers and providers will now decide how they choose to embrace the guidance. Self-funded employers, for example, may be inclined to adopt some level of change to incorporate these provisions into plans at 100 percent, or a plan-determined level of cost-sharing.

Health plan providers have a broad range of choices moving ahead and it’s unclear how aggressive they’ll be in updating plans. In one scenario, they could roll out multiple HDHPs as a way to separate the pools and minimize adverse selection. It’s realistic to expect, for example, that they would introduce a “basic HDHP” with lower coverage and also a “premium HDHP,” which would cover more chronic conditions.

More Options, Better Outcomes

IRS 2019-45 opens up new and better options for people with chronic conditions, allowing them to participate more easily in HDHPs with HSAs and enjoy better health outcomes. While few people associate the IRS with good news, that’s what the agency has delivered. With this new guidance, advisors have the opportunity to develop new strategies and solutions for a client segment that still faces obstacles but now has new opportunities to secure their health and wealth. With that in mind, advisors may want to proactively assess their clients’ needs and how the new guidance will affect them. Then they can reach out to clients, help them weigh their options and choose the best path forward. ◊