New IRS guidance expands high deductible health plan HSA options for treatment of chronic medical conditions

Arthritis is one of the more common chronic medical conditions that millions of Americans face. There are treatments before you get to the joint replacement stage, but those recurring medical costs can add up, too.

I finally filed away all the paper copies of last year's tax documentation and for the first time, I had more medical paperwork than work receipts.

Yep, 2018 (like 2017) was one of those medical years. And while I'm still enriching various Austin doctors, labs and hospitals with follow-up care in 2019, my conditions aren't considered chronic. Yet.

And no, basic aging doesn't count.

A chronic medical condition generally is one where the disease lasts for more than three months.

More help covering chronic health issues: The good news for folks with chronic illnesses is that medical science has ways to alleviate at the symptoms, if not fully cure the diseases, with preventative care.

Those treatments, however, can be expensive.

This week, the U.S. Treasury Department took steps to ease some of that medical cost pressure.

Certain sufferers of chronic conditions, specifically those who have a high deductible health plan (HDHP) and associated health savings account (HSA), now have more access to their plans to cover their preventative care costs.

The insurance specifics were announced July 17 in Internal Revenue Service Notice 2019-45, which provides more flexibility in paying for such treatments as glucose or blood-pressure monitors and regular medications for such ailments as asthma, congestive heart failure and diabetes.

That's welcome news to the growing number of HDHP participants, many of whom deal with chronic illnesses.

HDHP popularity: There's been a growing shift to HDHPs as medical insurance costs have increased.

Around 20 million Americans have opted for this coverage and its accompanying HSA option because HDHP premiums typically are lower than the monthly payments for traditional medical insurance.

To cover the higher deductible, an HDHP participant can open an HSA. In addition to paying for out-of-pocket medical costs, an HSA offers tax advantages, three in fact.

First, the money you put into the medical account is tax free. This is usually done through salary deferral at your workplace. The amount is taken out of your paycheck before taxes are calculated. If you make HSA contributions directly, the amount you contribute are tax-deductible.

Second, the earnings on the money you contribute to your HSA grows tax free.

Third, when you use the HSA money to pay allowable out-of-pocket medical expenses, those withdrawals also are tax-free. 

HDHP problems: For many, this HDHP/HSA coverage works out well, both medically and for their financial well-being.

But when a chronic illness appears, an HDHP's steep deductible becomes problematic. It can be difficult to overcome, leaving people with chronic illnesses footing preventative care costs out of their own pockets.

With this week's announcement, HDHP participants now can use their HSA dollars to pay for certain preventative treatments before they meet the deductible.

Plan payments eased: The expanded list of preventive care benefits that can be provided by an HDHP are:

In making the coverage change and adding new preventative care options payable from an HSA, representatives from Treasury, the IRS and the Department of Health and Human Services said they chose care that was low cost and likely to prevent the chronic illness from getting worse or the patient from developing a secondary condition that required higher cost treatments.

The three federal agencies will review and add or subtract from the list periodically, according to the notice.

More than patients are pleased: The change also was welcomed not only by ailing HDHP participants, but also by doctors, health benefits providers, employers and insurance companies.

When chronically ill patients forgo treatments because of costs, they often face more serious — and more expensive — conditions. Complications from not taking preventative medications can lead to limb amputation, blindness, heart attacks and strokes.

The Centers for Disease Control (CDC) says 6 in 10 U.S. adults have a chronic disease. Four in 10 two or more chronic ailments.

Such persistent illnesses are a major reason for the country's increasing health care costs.

From the workplace perspective, a study found that full-time workers with untreated chronic diseases cost employers $153 billion in lost productivity each year.

"Pre-existing, chronic conditions are debilitating for millions of Americans. These conditions also represent an enormous drain on the economy through high health costs and reduced employee productivity," said James A. Klein, president of the American Benefits Council, in a statement following the Treasury and IRS announcement.

"Modernizing HSAs to address chronic disease prevention is important to help tackle this problem," added Klein. "We remain committed to working with the Administration and Congress to build on this guidance and make HSAs more flexible."

You also might find these items of interest:

• High deductible health plan, HSA 2020 inflation amounts
• Comparing tax-favored HSA, HRA & FSA medical options
• Thumbing through the IRS' medical deduction (or not) list

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