New IRS Guidance Allows HDHPS To Cover Coronavirus Expenses Pre-Deductible

New IRS Guidance Allows HDHPS To Cover Coronavirus Expenses Pre-Deductible

New guidance from the Internal Revenue Service (IRS) released on March 11, 2020, gives health insurance issuers that offer qualified high-deductible health plans (HDHPs) in concert with health savings accounts (HSAs) significantly more flexibility when it comes to covering diagnostics and care related to COVID-19 or the coronavirus.

According to a 2003 federal law, qualified HDHPs must subject all benefits to a minimum deductible to legally pair with an HSA. The only exception is preventive care, as defined by the IRS.  However, the law gives the IRS broad authority when defining preventive care, as it applies to HDHPs and HSAs only.  Notice 2020-15 draws on this authority and allows health insurance issuers to offer health benefits associated with testing for and treatment of COVID-19 without a deductible, or with a deductible below the minimum deductible (self only or family) for an HDHP.  If a health insurance issuer does this, plan participants and employers will still be able to make tax-preferred contributions to HSAs.

There are some important nuances to consider concerning Notice 2020-15.

  1. It doesn’t change the department of Health and Human Services definition of preventive care.  So, it in no way affects the Affordable Care Act’s requirement that all non-grandfathered health plans must cover preventive care as defined by HHS with no cost-sharing.  At this time, COVID-19 testing and treatment have not been classified as preventive care by HHS.
  2. It does not address coverage provided by telemedicine visits.  Many health plans have expressed a desire to expand participant access to telemedicine services to help safely deal with initial COVID-19 screening. Many plans are also encouraging telemedicine use for other conditions for people who are quarantined or wish to avoid personal visits to medical facilities.  This notice does not allow HDHPs to waive cost-sharing for telemedicine visits for HDHP participants.  Individuals with HDHP coverage still must pay fair market value for each telemedicine appointment until they satisfy their deductible.
  3. It is temporary, but reliable for the time being.  The guidance makes it clear that this policy will be in effect until the IRS issues additional guidance to halt it.
  4. It’s not mandatory. HDHP issuers may eliminate the application of the deductible for COVID-19 testing or treatment or lower deductibles, but it is at their discretion.

If you have any questions about your health coverage plan and coronavirus coverage requirements, please contact your Client Executive or Account Manager. You can also refer to this list of carrier responses here.