The Inflation Reduction Act, HSAs and Insulin

President Biden signed the Inflation Reduction Act of 2022 (IRA) into law on August 16, 2022.  See our link to the law and our blog entry below. 

While most of the IRA was focused on tax reform, climate change, and healthcare costs, there was a significant provision included that can be used to protect a taxpayer’s HSA (Health Savings Account), while also expanding coverage for insulin.

Please keep in mind that one of the eligibility rules for an HSA is that you may not enjoy any other first-dollar-coverage before satisfying your deductible.  Although, there is a limited exception (a safe harbor) for preventive care visits, prescriptions, etc.  In 2019, in IRS Notice 2019-45, the IRS described preventive care for chronic conditions that can be covered prior to satisfying the HDHP deductible—thus protecting/preserving an individual’s HSA.  We blogged about that at the time here.

The IRA expands and further codifies the IRS’ guidance by permitting an HDHP to cover “selected insulin” products prior to the deductible, without regard to whether the individual has been diagnosed with diabetes.  While IRC Section 223(c)(2)(C) states that preventive care is excluded as disqualifying first-dollar-coverage, the IRA defines “selected insulin products” as any dosage form (vial, pump, inhaler) or any type of insulin (short/rapid/intermediate/long/ultra-long-acting and premixed) and expands “preventive care” to include them (in general) as well as removing the diagnosis requirement.

When will this take effect?  For plan years beginning on or after December 31, 2022, HDHPs will be permitted to cover insulin for a broader range of uses than before—and they may do so prior to the plan participant meeting their deductible.  So, calendar year plans may adopt these changes for January 1, 2023.

 

Links:

• 8/16/22 blog:  Inflation Reduction Act Passed, Signaling Changes to the Healthcare Industry
• IRA (Inflation Reduction Act) as passed by Congress
• IRS Notice 2019-45
• 7/18/19 blog: IRS Expands List of Preventive Care for HSA Participants