Seyfarth Synopsis: One of many COVID-19 benefits-related concerns focused on the ability of individuals covered under High Deductible Health Plans to have services to diagnose or treat the coronavirus covered before their deductible is met. The IRS has listened to the concerns and just issued guidance in response.
As aficionados of the benefits space know, a covered person under a High Deductible Health Plan (HDHP) cannot get medical services covered under the plan (other than preventive services, like the flu vaccine) before satisfying his/her deductible. The deductibles tend to be set at a very high level; hence the name “High Deductible” health plan. If services are covered before the deductible is met, the plan will fail to be a HDHP, rendering the covered person ineligible to make tax-favored contributions to a Health Savings Account (HSA) for that year.
Last week, America’s Health Insurance Plans (AHIP), a trade association that includes most major carriers and third-party administrators, announced that they would offer clients the opportunity to modify their plan designs to waive all cost-sharing for services relating to COVID-19 testing and treatment. Many TPAs also offered to waive fees for all telemedicine services (COVID-19 or otherwise), to reduce foot traffic in doctor’s offices where a patient is at greater risk of contracting the virus. While this was welcome news, it created much uncertainty for sponsors of HDHPs who wondered whether waiving cost-sharing would impact HSA eligibility for enrollees.
In Notice 2020-15, the Internal Revenue Service has issued welcome relief to individuals who have medical coverage under an HDHP (which constitute roughly 50% of commercial insurance policies). The IRS called the COVID-19 outbreak a “public health emergency” and stated that until further notice, a medical plan intended to be an HDHP will not fail to be an HDHP if it covers medical costs associated with testing and treating COVID-19 without application of the deductible or otherwise-applicable cost-sharing.
So, once testing kits are more widely available, an individual will be able to take the test and submit the cost of the testing to the HDHP without worry of losing eligibility for his/her HSA for 2020. Moreover, under this guidance it appears all other related care (hospitalization, office visits, etc.) could also be covered without cost-sharing.
Unfortunately, the guidance did not address whether telemedicine may be offered at no cost (pre-deductible) to a participant in an HDHP, except in the context of a coronavirus-related service. More guidance would be welcome in this space, but in the interim plan sponsors should proceed with caution and should consider whether to continue imposing some sort of cost-sharing for this benefit.