Update 12/23/2022: On December 23, 2022, Congress approved a year-end Consolidated Appropriations Act, 2023 (“CAA 2023”). While the CAA 2023 is largely a spending bill, it also includes a new telehealth safe harbor that will continue telehealth relief for high deductible health plans beyond the current December 31, 2022, expiration date through December 31, 2024.
Since January 1, 2020, temporary relief has permitted high deductible health plans (HDHPs) to provide telehealth services at low or no cost prior to meeting the required deductible in order to preserve Health Savings Account (HSA) eligibility for plan participants. This temporary relief was set to expire December 31, 2022, but is now further extended to also apply for plan years beginning after December 31, 2022, and before January 1, 2025.
- Coverage of free or low-cost telehealth services prior to meeting the HDHP minimum deductible may jeopardize HSA eligibility for plan participants.
- Temporary relief permits HDHPs to provide such telehealth services to preserve HSA eligibility, through plan years beginning before January 1, 2025.
- HDHPs that provide coverage as described beyond plan years beginning after January 1, 2025, may impact the ability of plan participants to contribute to an HSA.
Background: HSAs & Telehealth
To be HSA eligible (i.e., contribute to and receive non-taxable contributions to an HSA), individuals must be covered by a qualifying HDHP and have no other disqualifying coverage (generally, any medical coverage that pays before the deductible is met). For a plan to be considered a qualified HDHP, the plan must impose a statutory minimum deductible before the plan pays for covered services (with exceptions for preventative care).
Lack of Guidance: Currently, there is no direct guidance that specifies how receiving services via telehealth impacts an individual’s ability to contribute (or receive contributions) to an HSA. On the other hand, general HSA rules and similar IRS guidance (related to employee assistance programs (EAPs) and on-site clinics, for example), provides that coverage of “significant benefits” involving medical care before the minimum statutory deductible is satisfied will prohibit HSA eligibility. Further, there is no IRS guidance on what is considered “significant benefits”; however, the amount, scope and duration of services should be considered. Telehealth offerings can vary widely, and whether “significant benefits” are provided should be analyzed prior to determining the impact on employee’s HSA eligibility.
Considering the above, coverage of free or low-cost telehealth services prior to the HDHP minimum deductible being met could jeopardize HSA eligibility for plan participants.
Telehealth Relief: In 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), which permitted HDHPs to provide telehealth services (even those unrelated to the testing or treatment of COVID-19) at low or no cost prior to the deductible being satisfied through December 31, 2021. In other words, individuals could receive telehealth services pre-deductible at low or no cost without jeopardizing their HSA eligibility. Further, Congress extended this relief under the Consolidated Appropriations Act of 2022 (2022 CAA), which was set to expire December 31, 2022. For more information on the telehealth relief and the CARES Act and 2022 CAA extensions, see our blog Congress Passes a Temporary Extension to the CARES Act Telehealth/HSA Relief.
On December 23, 2022, Congress passed CAA 2023 which, among other items, includes a new telehealth safe harbor that will continue telehealth relief beyond the current December 31, 2022 expiration date. This relief will now apply to plan years beginning after December 31, 2022, and before January 1, 2025. This appears to combine the relief under the CARES Act and the 2022 CAA so that both calendar and non-calendar year plans will be able to take advantage of the relief from the start of their 2023 plan year through the end of their 2024 plan year.
Impact to Group Health Plans
With this relief no longer set to expire, qualified HDHPs that provide coverage for telehealth services at low or no cost prior to the deductible being satisfied will not impact plan participants’ ability to contribute to an HSA, effective for plan years beginning after December 31, 2022, and before January 1, 2025.
Employers who sponsor qualified HDHPs and also provide telehealth coverage without cost sharing have further relief (such that participants’ HSA eligibility will not be impacted by this plan design) for plan years beginning after December 31, 2022, and before January 1, 2025.
As this relief is temporary, HDHPs that provide coverage as described for plan years beginning after January 1, 2025, may impact the ability of plan participants to contribute to an HSA (if no further guidance or relief is provided).
Employers who made plan design changes anticipating the relief to expire (who wish to provide telehealth coverage without cost sharing) should review if any further plan document updates are needed with their carrier/TPA.
- Consolidated Appropriations Act, 2023
- Health Care-Related Expiring Provisions
- The Consolidated Appropriations Act of 2022
- Sequoia Forewords:
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