Audio CD and written materials of AIS's audioconference on December 18, 2007

HSAs and Preventive Drugs: How to Reduce Your Risks With the IRS

Coverage of preventive drugs is the fastest-growing trend in health savings account (HSA)-based health coverage. But covering preventive drugs below the deductible is complex and filled with compliance risks. Although the IRS and Treasury Dept. have said preventive drugs can be covered below the deductible for HSA-qualified plans, few drugs are used for preventive purposes 100% of the time. While the cost of a drug used to prevent a stroke can safely be covered outside of the annual deductible, the same drug, if used to treat high blood pressure, would likely make the plan ineligible to work with an HSA, and could lead to substantial financial penalties. Uncertainty about the rules has kept many health plans from including preventive drugs in their HSA-qualified products. And employers are skittish about covering those medications below the deductible.

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In the absence of specific guidance from IRS, several health plans and pharmacy benefit managers (PBMs) have developed their own lists of preventive drugs that are believed to comply with the IRS rules on HSAs. But legal experts warn that health plans and PBMs must also evaluate why a drug is prescribed, since dual-purpose drugs could lead to noncompliance for employers and enrollees if a drug is used to treat a condition rather than prevent one. Violations of these IRS rules could result in financial penalties for enrollees as well as taxes on HSA contributions and earnings.

In mid-2005, Aetna, Inc. became the first large health insurer to offer its employer clients a list of drugs that it considers to be compliant with the IRS rules. Medco Health Solutions, Inc. established its own list of preventive drugs several months later. IRS and Treasury, however, have avoided comment on such drug lists, and employee benefits attorneys warn that such lists could lead to serious compliance problems. 

Hear a provocative debate over how to determine whether a drug can be covered outside of the deductible and ensure that the health plan remains HSA-compliant.

First up, John Hickman, an attorney with Alston & Bird and one of the nation’s most respected authorities on HSA compliance, explains why he believes health plans, PBMs and employers need to develop a strategy to determine whether a drug was prescribed to prevent an illness or to treat an existing condition. Preventive drug lists that include dual-purpose drugs, he warns, are a bad idea.

Next, Nancy Summa, HSA product manager at Aetna, describes why her firm chose to develop a preventive drug list and the criteria it uses to evaluate the drugs. She also explains why employers should consider adopting such drug lists. Aetna says 145 of its employer clients have taken advantage of the list to cover drugs outside of the deductible for HSA-based plans.

Finally, Tracy Grunsfeld, vice president of consumer solutions at Medco, offers the PBM perspective and explains the administrative steps it uses to ensure that drugs prescribed for preventive purposes can be treated as such under an HSA-qualified health plan. According to Medco, coverage of preventive Rx is the fastest-growing trend in CDH coverage. 

You’ll get information and strategies on:

• What are the boundaries of preventive drugs and the IRS’s “safe harbor” rules?
• What can be done to ensure a drug in a preventive class is prescribed for a preventive function?
• Which drugs/services can employers safely cover outside of the deductible? Which should be avoided?
• What are the risks for employers and enrollees if a drug is used to treat an existing condition?
• Can first-dollar coverage for preventive drugs have a positive effect on the health of enrollees?
• What do health plans and PBMs need to do before setting up a preventive-drug list?
• How can coverage of preventive drugs in an HSA-based plan be structured to have the optimal impact on enrollee health?

 

Speakers

JOHN HICKMAN, Esq. is head of Health & Welfare Benefits in the Employee Benefits and Executive Compensation Group at the law firm Alston & Bird, LLP in Atlanta. Mr. Hickman also chairs the Employers Council on Flexible Compensation's technical advisory committee and is an adjunct professor at Emory University School of Law. He is cited in "The Best Lawyers in America" for his health and welfare expertise.

NANCY SUMMA is a product manager for consumer-directed products at Aetna, and is the product manager responsible for product development of Aetna’s HSA products and development of other initiatives including Value Based Insurance Design and payment assurance. Ms. Summa previously led product-development initiatives for Aetna’s health reimbursement arrangement product, and has broad health care marketing experience, including marketing research, strategy, product management and product development, at Aetna and CIGNA HealthCare.

TRACY GRUNSFELD, Medco’s vice president of insured and emerging markets, leads the development of consumer-directed benefit design and member decision-support capabilities, as well as data integration with insurance carriers, health debit-card companies and other third-party administrators. Ms. Grunsfeld has published numerous articles on consumer-directed health and is a frequent speaker.  

Moderator: Steve Davis is managing editor of AIS's industry-leading biweekly newsletter, Inside Consumer-Directed Care.

 

Designed Especially For

• Health plan and insurance company
  • CFOs
  • Customer-service and call-center managers
  • Product managers
  • Business development directors
  • Marketing VPs
  • Market research managers and analysts
• Insurance brokers and sales staff
• Third-party administrators
• HSA administrators and other financial firms
• Credit unions
• Employer human resources VPs
• Marketing directors at consumer-directed health (CDH) plans
• CDH-related vendors
• Executives at financial firms that work with HSAs
• Attorneys and consultants
• Actuaries

Written Materials