The IRS recently issued two notices related to group health plan preventive care coverage and medical care reimbursement: 1) Notice 2024-71 provides that male condoms are medical care for purposes of tax deductions and account-based healthcare plan reimbursements; and 2) Notice 2024-75 allows employers with health savings account (HSA)-qualified high-deductible health plans (HDHPs) to cover over-the-counter (OTC) oral contraceptives (including emergency contraceptives), male condoms, breast cancer screenings other than mammograms, continuous glucose monitors and certain insulin products before an individual meets the plan’s minimum annual deductible (self-only or family).
Medical care expenses
Generally, the Internal Revenue Code (IRC) allows employees to take tax deductions and receive reimbursement from an account-based medical plan for qualified medical care expenses. Medical care is defined as the diagnosis, cure, mitigation, treatment, or prevention of disease, or to affect any structure or function of the body. The IRS has provided guidance over the years on what expenses meet the definition of medical care.
Notice 2024-71 updates previous guidance to include male condoms as medical care. This means taxpayers may be able to take an income tax deduction for amounts spent to purchase male condoms for themselves, their spouses or their dependents. Additionally, the cost of male condoms may be paid or reimbursed under account-based health plans such as health flexible spending accounts (health FSAs), health reimbursement arrangements (HRAs) or HSAs; however, if the expense is reimbursed, it would no longer be deductible.
HDHP preventive care
To qualify for establishing an HSA, eligible individuals must be covered under an HDHP and have no disqualifying health coverage. An HDHP may not provide benefits before certain required minimum deductibles and maximum out-of-pocket expenses are met – with the exception of preventive care.
To be considered preventive care, benefits must be listed either in Section 1861 of the Social Security Act (SSA) or in guidance from the Department of the Treasury and the IRS. Anything intended to treat an existing illness, injury or condition is not considered preventive care.
Notice 2024-75 expands the definition of preventive services for HDHP/HSA purposes to include:
- OTC oral contraceptives (including emergency contraceptives) for an individual who may become pregnant, including OTC birth control pills and emergency contraception, purchased with or without a prescription
- Male condoms purchased with or without a prescription, regardless of the gender of the individual covered under the HDHP who purchases them
Notice 2024-75 also clarifies that:
- All types of breast cancer screening for individuals who have not been diagnosed with breast cancer are treated as preventive care. Because breast cancer screening may include imaging other than mammograms, prior notice guidance on qualified breast cancer screening is changed from mammograms only to “Breast Cancer (e.g., Mammograms, Magnetic Resonance Imaging (MRIs), Ultrasounds, and similar breast cancer screening services).”
- Continuous glucose monitors are considered preventive care in the same circumstances as other glucometers if they use similar methods to measure glucose levels (i.e., piercing the skin). A continuous glucose monitor that both monitors and provides insulin may be treated as preventive care because it is a device for delivering insulin. However, if a continuous glucose monitor has additional functions that are not preventive care (other than minor functions, such as clock and date), then the HDHP may opt not to treat it as preventive care.
- The IRC safe harbor for absence of a deductible for certain insulin products applies regardless of whether the insulin product is prescribed to treat diabetes or to prevent the exacerbation of diabetes or the development of a secondary condition.
Going forward
- Any services and items that constitute preventive care under the IRS guidance in Notice 2019-45, Notice 2004-23, Notice 2004-50 and Notice 2013-57 are treated as preventive care under the tax code and can be covered before the HDHP’s minimum annual deductible is met.
- Employers should ensure their third-party administrators (TPAs) are aware that the pre-deductible coverage of the preventive services added under Notice 2024-75 will not affect a participant’s HSA eligibility.
- Employer sponsors of health FSAs or HRAs choosing to reimburse the cost of male condoms as a medical expense should discuss this with their TPAs and update plan materials, including plan documents and summary plan descriptions.
