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HSA Provision Included in Inflation Reduction Act

The Senate passed the Inflation Reduction Act (IRA) on Sunday, August 7, 2022, under its budget reconciliation authority – meaning that a simple majority was needed to pass the bill. Among the provisions in the IRA were provisions to place a cap on the cost of insulin at $35. Under the originally introduced bill, this cap applied to government programs, such as Medicare, and private insurance. Because requiring all insurance policies to have a minimum co-pay of $35 for insulin would cause a high deductible health plan not to qualify as a HSA-qualified high deductible health plan, the bill also provided an amendment to Section 223 of the Internal Revenue Code (the provision that outlines the requirements for HSAs) that stated  “A plan shall not fail to be treated as a high deductible health plan by reason of failing to have a deductible for selected insulin products.” This provision is effective for plan years after December 31, 2022. Consequently, a high deductible health plan that capped the amount that an insured would pay for insulin at $35, regardless of whether the deductible had been reached would still be considered a high deductible health plan and those covered by the plan could make contributions to an HSA.

Under the budget reconciliation rules, the Senate Parliamentarian determines whether all the provisions in a bill being considered under budget reconciliation authority meet the budget reconciliation requirements. If they do not, the bill sponsors will drop that provision from the bill being considered. The bill sponsors may also seek a vote from the Senate to overrule the Parliamentarian’s ruling and if 60 Senators vote in favor of overruling the Parliamentarian, that provision will be in the bill. The Senate Parliamentarian ruled that the provision requiring all private insurers to have a minimum co-pay for insulin violated the budget reconciliation requirements and that provision was dropped. Senate Democrats attempted to overrule the Parliamentarian’s ruling in this matter, but even though all Senate Democrats voted to overturn the Parliamentarian’s ruling, not enough Republican Senators voted for the overturn of the ruling. Consequently, the bill that was passed on Sunday does not contain a provision that would require all private insurance coverage to have a minimum co-pay of $35 for insulin. However, the provision that would permit HSA qualified high deductible health plans to have a co-pay for insulin that was below the deductible remained in the Senate-passed bill.

The House of Representatives will next consider the Inflation Reduction Act. The bill that will be under consideration by the House does not require that all private insurers have a minimum co-pay of $35 for insulin but it does contain the provision for HSAs in Section 11408 of the bill. While a date has not been set for the House to vote on the IRA, we assume the House will pass the Senate bill and President Biden will sign the bill. Consequently,  effective for plan years beginning after December 31, 2022, an HSA qualified high deductible health plan will be able to have a co-pay for insulin that is below the deductible.