On a Form 1099-SA, code 2 means that only the amount in box 2 is taxable and is not subject to the 20% penalty. Code 1 means that any portion of the amount in box 1 that is not claimed as a qualified medical on Form 8889 is taxable and, if you are under age 65 is subject to the 20% penalty. The IRS Automated Underreporter System compares your tax return with what it calculates from the informational returns provided by payers and flags discrepancies, so if you don't provide explanation the IRS might modify your tax return to agree with the code-2 Form 1099-SA.
If you like, you could try filing without explanation and deal with the consequences later if the IRS changes your tax return, but that's up to you.
