EBRI Issue Brief

The Impact of Expanding Pre-Deductible Coverage in HSA-Eligible Health Plans on Premiums

May 19, 2022 19  pages


IRS Notice 2019-45 allows health savings account (HSA)-eligible health plans the flexibility to cover 14 medications and other health services used to prevent the exacerbation of chronic conditions prior to meeting the plan deductible. There is limited evidence on the impact of expanding pre-deductible coverage on insurance premiums. In this Issue Brief, we use claims data to quantify the effect of expanded pre-deductible coverage of services and medications specified in IRS Notice 2019-45 on premiums.

Key Findings:

  • The impact on premiums of expanding pre-deductible coverage for 14 services in HSA-eligible health plans as allowed in IRS Notice 2019-45 is small. Estimated premium increases range from virtually zero to 1.5 percent.
  • There is no expected premium increase when deductibles are replaced by coinsurance, use of health care services is assumed not to increase due to lower cost sharing, and enrollees’ related diagnoses are required.
  • We found a 0.9 percent increase in premiums when use of health care services was assumed to increase because of the lower cost sharing and when employers did not impose any cost sharing.
  • If all 14 services were excluded from pre-deductible coverage with no cost sharing, there was increased use of health care services, and the services were covered whether or not an enrollee had a related diagnosed condition, premiums would increase by 1.5 percent.

Several factors explain the relatively small increases in premiums. The percentage of enrollees with any of the diagnoses mentioned in the IRS notice is low. As a result, use of the 14 services allowed to be covered pre-deductible is also relatively low, especially among enrollees with a related diagnosis. The cost for nearly all the 14 services allowed to be covered pre-deductible is relatively low when spread across the entire population. Users of the 14 health care services are commonly high users of health care more generally because of their health conditions and often meet their deductible. As a result, even when coverage for services is provided pre-deductible, these users are likely to continue to meet their deductible. Employers could easily recoup the forgone cost sharing by imposing a pre-deductible copayment or coinsurance.

Even before there was evidence that expanding pre-deductible coverage had a negligible impact on premiums, there was an appetite among employers for adding more services if allowed by the IRS. There is also support for expanding pre-deductible coverage among policymakers, as evidenced by the Chronic Disease Management Act, which was reintroduced in the U.S. Congress as recently as May 2021. This bipartisan, bicameral legislation would provide HSA-eligible health plans additional flexibility to provide pre-deductible coverage for services that manage chronic conditions.

This study was conducted through the EBRI Center for Research on Health Benefits Innovation (EBRI CRHBI), with the funding support of the following organizations: Aon, Blue Cross Blue Shield Association, ICUBA, JP Morgan Chase, National Pharmaceutical Council, Pfizer, and PhRMA.