November 07, 2024

The IRS recently issued Notices 2024-71 and 2024-75, expanding preventive care options under health accounts and high-deductible health plans (HDHPs), including the classification of condoms as eligible medical expenses. While issued separately and in advance, the safe harbors issued are directly related to and clear the way for the Departments’ Enhancing Coverage of Preventive Services Under the Affordable Care Act proposed rule.

In Notice 2024-71, the IRS established a safe harbor that classifies condoms as medical expenses under Section 213 of the Internal Revenue Code (IRC). This designation means that condoms are now eligible for tax-free purchase through health accounts including HSAs, HRAs and FSAs. The safe harbor also treats amounts paid for condoms as deductible expenses, provided the total medical costs exceed the adjusted gross income threshold of 7.5% and are not compensated by insurance.

Notice 2024-75 expands the preventive care safe harbor for HDHPs under Section 223, allowing these plans to cover new services and items without requiring the participant to meet the deductible. Most notably, this expansion now permits HDHPs to cover over-the-counter (OTC) oral contraceptives and condoms without a prescription.

These contraceptive classifications are ultimately expected to dovetail with the Women’s Preventive Services Guidelines issued by the Health Resources and Services Administration (HRSA), which now include the full range of FDA-approved contraceptives listed in the FDA’s Birth Control Guide, such as the recently-approved “Opill” and emergency contraceptives like levonorgestrel. These HRSA guidelines have removed the previous requirement that contraceptives be “as prescribed,” allowing for broader access to OTC options.

Expansion of these safe harbors is effective immediately (each provision is retroactively effective to different dates from December 2022 to April 2024).

Other services and items covered under this safe harbor include:

• HIV treatments, including a single-pill and injectable option alongside pre-exposure prophylaxis (PrEP)

  HDHPs must make all three options available without cost-sharing, ensuring that formulary restrictions do not limit access to any of these treatments.

• Breast cancer screening methods beyond just mammograms, encompassing MRIs, ultrasounds, and other recommended screenings.
• Continuous glucose monitors for individuals with diabetes.

  These devices fall under the same preventive care rules as traditional glucometers, provided they meet certain monitoring standards.

• Insulin products for either diabetes treatment or the prevention of diabetes-related conditions.

  This is in line with the Inflation Reduction Act of 2022, which amended Section 223 of the IRC to allow HDHPs to cover insulin products without a deductible and still qualify as HDHPs for HSA eligibility purposes.

More Topics

Resource Compliance Health Accounts Affordable Care Act (ACA)