Seyfarth Synopsis: The IRS recently published two notices which describe the tax treatment of amounts paid for condoms and expand the list of preventive care benefits permitted to be provided by a high deductible health plan (HDHP) without payment of a deductible.
Notice 2024-71 – This notice provides that amounts paid for condoms will be treated as an expense for medical care under section 213(d) of the Internal Revenue Code (IRC) and are eligible to be paid or reimbursed under a health flexible spending account (health FSA), Archer medical savings account (Archer MSA), health reimbursement account (HRA), or health savings account (HSA).
Employers should check their health FSA, HRA and HSA plan documents. If medical expenses under IRC Section 213(d) are reimbursable, no amendment is necessary and expenses for condoms may be reimbursed.
Notice 2024-75 – Under the IRC, in order to establish an HSA, an individual must be covered under a HDHP. Generally, benefits cannot be provided under a HDHP until a minimum deductible is met. Under a safe harbor, however, there is an exception for amounts paid for preventive care. Notice 2024-75 clarifies and expands the safe harbor (retroactively) by providing that a plan will not fail to qualify as a HDHP, and will not compromise an individual’s eligibility for an HSA, if it provides first dollar coverage for:
- Over the counter (OTC) oral or emergency contraceptives (effective for plan years beginning on or after December 31, 2022);
- Male condoms, with or without a prescription (effective for plan years beginning on or after December 31, 2022);
- Breast cancer screening in addition to mammograms, such as magnetic resonance imaging (MRIs), ultrasounds or similar screenings (effective April 12, 2004);
- Continuous glucose monitors that measure glucose levels using a similar detection method as other glucometers (i.e. piercing the skin), even if the monitor also delivers insulin (effective July 17, 2019);
- Select insulin products, including any dosage form (such as vial, pump, or inhaler) of any different type of insulin (such as rapid-acting, short-acting, intermediate-acting, long-acting, ultra long-acting, and premixed), regardless of whether the product is prescribed to treat an individual with diabetes or prevent the exacerbation of diabetes or a secondary condition (effective for plan years beginning after December 31, 2022.
Proposed Rules & OTC Contraceptives – Under the Affordable Care Act, group health plans must provide coverage for certain preventive services when delivered by in-network providers, including care described in the comprehensive guidelines supported by the Health Resources and Services Administration (HRSA) for women. The HRSA guidelines ensure access to a full range of FDA-approved contraceptive methods if prescribed. Plans are permitted to use reasonable medical management techniques to determine the frequency, method, treatment or setting for an item or service to the extent not specified in the relevant recommendation or guideline.
The Departments of Labor, Treasury and Health and Human Services (the Departments) recently issued proposed rules that would require plans to cover OTC contraceptives without cost-sharing and without a prescription. Although plans would be permitted to apply medical management techniques, the proposed rules would not consider a medical management technique to be reasonable unless the plan covers all FDA-approved contraceptive drugs and drug-led combination products without cost-sharing, other than those for which there is a covered therapeutic equivalent that the plan covers without cost-sharing. (A therapeutic equivalent refers to a drug with the same active ingredients and dosage.) The proposed effective date is for 2026 plan years, but it is unclear what the fate of these proposed rules will be under the Trump administration.
In addition, to ensure that participants are aware of the changes in coverage, the proposed rules would require a disclosure pertaining to coverage for OTC contraceptive items without cost-sharing in the plan’s Transparency in Coverage internet-based self-service tool. If a participant or beneficiary requests cost-sharing information for any contraceptive item or service, a plan would have to provide information explaining that the OTC contraceptive items are covered without cost-sharing and without a prescription, along with a phone number and internet link to where more information could be obtained.
Please contact the employee benefits attorney at Seyfarth Shaw LLP with whom you usually work if you have any questions regarding the impact of this update on your health and welfare and related plans.
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