IRS Releases More Guidance On Health SAvings Accounts

The high-deductible health insurance policies can offer special low-deductible coverage for certain types of preventive care.

Notice 2004-23 establishes a "safe harbor" provision that gives more details about what sellers of HSA-compatible policies can treat as preventive care benefits.

In most cases, insurers that sell HSA-compatible policies can treat annual physical exams, immunizations, routine screening services, routine prenatal care, routine well-child care, tobacco-cessation programs and weight-loss programs as preventive care, the IRS says.

The IRS is asking for public comments about whether insurers should be able to treat wellness programs and mental health programs as preventive care programs.

The transition relief documents let individuals who want HSAs but already have low-deductible prescription drug coverage keep the coverage and contribute to HSAs until 2006.

Snow says the IRS is letting HSA holders keep existing prescription drug coverage because some insurers thought that high-deductible policies with low-deductible drug benefits were compatible with the HSA program. "We do not want to penalize people who bought products thinking that they could contribute to an HSA," Snow says.

The IRS gets around the problems that some taxpayers are having with finding HSA asset custodians by letting taxpayers use HSAs established as late as April 15, 2005, to cover costs incurred in 2004.

The IRS released a preliminary version of its first batch of HSA guidance in December 2003. The first batch, contained in IRS Notice 2004-2, provided rough, basic information about how HSAs ought to work. The authors of that first notice asked members of the public for advice about more complicated topics, such as how the IRS ought to define "preventive care."

Reproduced from National Underwriter Edition, April 2, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.