“Inflation Reduction Act” Creates HSA Safe Harbor for Insulin

Much has been said in the news media about the insulin-related provisions in the Senate-passed version of the “Inflation Reduction Act,” the slimmed down version of the “Build Back Better Act” (H.R. 5376) passed by the House of Representatives last Fall.  Most of the attention has been focused on the procedural move that Republican Senators used to “strip” the provisions (Sec. 90001) from Majority Leader Schumer’s substitute amendment that would have required private insurance coverage (employer-based or otherwise) to cover insulin and related products without a deductible and cap cost-sharing at $35/month.  The $35 monthly cap on cost-sharing would have also applied to Health Savings Account (HSA)-qualified plans had Sec. 90001 survived.

While these provisions were left on the cutting room floor, a little-noticed provision elsewhere in the Schumer substitute amendment—Sec. 11408—survived.  This provision essentially codifies earlier guidance from the Internal Revenue Service that permits “HSA-qualified plans” (i.e., high deductible health plans that make Americans eligible to contribute to HSAs under Section 223 of the Internal Revenue Code) to cover insulin and related products with no deductible applied and with no or limited cost-sharing.

The new safe harbor applies to any dosage form (such as a vial, pump, or inhaler) of any type of insulin (such as rapid-acting, short-acting, intermediate-acting, long-acting, ultra-long-acting, and pre-mixed).  Under existing IRS guidance, HSA-qualified plans may already cover insulin and other glucose lowering agents, glucometers, and hemoglobin A1c testing, as well as retinopathy screening and certain drugs (statins, and ACE inhibitors) that are commonly used to treat patients with diabetes.

Most of these services are not defined in law as “preventive care” by the Affordable Care Act so private health insurance plans are not required to cover them.  However, a recent analysis by the nonprofit Employee Benefit Research Institute in Washington, D.C. found that three-quarters of large U.S. employers offering HSA-qualified plans have already expanded pre-deductible coverage for medications and services that keep chronic conditions, such as diabetes, under control, in response to IRS guidance.

The House of Representatives passed the Senate bill on Friday, August 12. President Biden is expected to sign the bill into law sometime next week. The new safe harbor will be effective for plan years beginning on or after January 1, 2023.