The IRS has released two notices providing guidance on medical expense issues for health FSAs, HRAs, HSAs, and HDHPs. Specifically, the IRS will treat amounts paid for condoms as medical care expenses for reimbursement under health FSAs, HRAs, and HSAs. In addition, several benefits are now considered preventive care for purposes of qualified high-deductible health plan coverage.
Applies To:
- All employers offering high-deductible health plans (HDHPs).
- All employers offering tax-advantaged arrangements, including FSAs, HRAs, and HSAs.
Go Deeper:
On October 17, 2024, the IRS released Notices 2024-71 and 2024-75. Here are the highlights to be reviewed by employers and TPAs:
Medical care expenses for tax-advantaged arrangements – Under a new safe harbor, the IRS will treat amounts paid for condoms as medical care under Code § 213(d). (According to the notice, amounts paid for condoms otherwise might or might not be considered medical expenses under Code § 213(d), depending on the specific facts and circumstances.) Therefore, these amounts can be paid or reimbursed under a health FSA, HRA, or HSA.
Preventive care benefits for HDHPs – The IRS gives an updated list of benefits that can be considered preventive care under a high deductible health plan and paid prior to meeting the minimum HDHP deductible:
- OTC oral contraceptives and OTC male condoms,
- Breast cancer screenings other than mammograms (e.g., MRIs and ultrasounds),
- Continuous glucose monitors under the same circumstances as other glucometers, if the monitor measures glucose levels using a similar detection mechanism. Other medical functions (e.g., insulin delivery) or nonmedical functions (other than minor functions—e.g., clock and date) that the continuous glucose monitor has must also be preventive care for the HDHP to cover benefits for the monitor before the HDHP minimum deductible is met.
- Insulin products, including any devices used to administer or deliver insulin products, whether it is for treatment of diabetes or prevent the development of a secondary consider.
Changes in coverage may require amendments to the plan documents. TPAs and employers offering HDHPs, FSAs, HRAs and HSAs will need to review this guidance and update their plan benefits and plan documents accordingly.
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