Expanding Pre-Deductible Coverage for Chronic Conditions Doesn't Hike Premiums, Study Finds

Providing coverage of medications and other treatments for chronic health conditions before employees meet their plan deductibles does not significantly raise health plan premiums, new research shows. For employees, pre-deductible coverage makes health care more accessible.

The Affordable Care Act requires nongrandfathered health plans to cover certain preventive services without cost-sharing, within certain guidelines. However, under IRS regulations, high-deductible health plans (HDHPs) could not pay for the treatment of existing chronic conditions if plan enrollees' health care spending hadn't exceeded their plan deductible, as that would run afoul of the rules allowing contributions to health savings accounts (HSAs).

Since July 2019, however, when the IRS issued Notice 2019-45, employers have had the option of covering 14 specific treatments for chronic conditions outside of HDHP deductibles, but they are not required to do so.

These medications and services are aimed at treating diabetes, heart disease, asthma, depression and osteoporosis:

A Small Effect on Premiums

A May 2022 Issue Brief by the Employee Benefit Research Institute (EBRI), The Impact of Expanding Pre-Deductible Coverage in HSA-Eligible Health Plans on Premiums, analyzed claims data and found that the effect on health plan premiums of expanding pre-deductible coverage for the above 14 services was small. Estimated premium increases range from virtually 0 to 1.5 percent.

"The cost for nearly all the 14 services allowed to be covered pre-deductible is relatively low when spread across the entire population," EBRI reported. In addition, "users of the 14 health care services are commonly high users of health care more generally. … As a result, even when coverage for services is provided pre-deductible, these users are likely to continue to meet their deductible."

Employers also can recoup pre-deductible coverage costs "by imposing a pre-deductible co-payment or co-insurance," EBRI advised.

Employers Expand Pre-Deductible Coverage

Last fall, EBRI reported that three-quarters of large U.S. employers offering HSA-eligible health plans had expanded pre-deductible coverage for medications and services that keep chronic conditions under control, in response to IRS Notice 2019-45. The data came from a survey of benefits decision-makers at 354 U.S. companies with at least 200 employees, conducted in July and August 2021.

The researchers found that most employers (81 percent) would add pre-deductible coverage for additional health care services if allowed by law.

"Even in the absence of evidence that expanding pre-deductible coverage will increase premiums by only a small amount, employers were already reporting that they would add additional services on a pre-deductible basis if allowed by the IRS," said Paul Fronstin, director of EBRI's health benefits research.

Additional Pre-Deductible Coverage Sought

"There is bipartisan, bicameral legislation that has been introduced in the U.S. Congress that would provide additional flexibility to extend pre-deductible coverage to services that manage chronic conditions," said A. Mark Fendrick, director of the Value-Based Insurance Design Center at the University of Michigan. "Employers and policymakers have an appetite for more flexible plan designs or 'smarter' deductibles" that could reduce the financial burdens on employees caused by rising health care costs.

Related SHRM Articles:

Health Plans Face Decisions Over Preventive Screenings Coverage, SHRM Online, March 2022

Employers Expand Pre-Deductible Coverage for HSA-Eligible Health Plans, SHRM Online, November 2021

IRS Allows Health Plans to Cover More Treatments Before Deductible Is Met, SHRM Online, July 2019