In response to the unprecedented public health risk and business disruption caused by the Coronavirus, or COVID-19, pandemic, the Internal Revenue Service recently issued Notice 2020-15.  This Notice provides greater flexibility for individuals covered under high deductible health plans (HDHPs) and associated health savings accounts (HSAs) to obtain coverage for testing and treatment of COVID-19 without jeopardizing the tax benefits of HDHPs and HSAs.

The Notice allows individuals participating in an HDHP to receive coverage for testing and treatment of COVID-19 without having to first satisfy the deductible requirements for the HDHP.  An HDHP and HSA arrangement allows covered individuals to use pre-tax dollars to pay for eligible health care expenses, subject to certain restrictions on the timing and nature of benefits that can be paid under the HDHP.  To qualify as an HDHP, a covered individual must satisfy minimum deductibles before the plan can pay for any medical care or treatment, other than certain preventive care and other limited benefits.  Consequently, prior to the IRS guidance, it was unclear whether HDHPs could pay benefits for COVID-19 testing and treatment until the individual’s deductible was met.

Although not directly addressed in the Notice, telemedicine and virtual or online care and treatment related to COVID-19 should be eligible for coverage under an HDHP without satisfying the deductible.  Many health care providers also are suggesting telemedicine and virtual appointments for other medical or health conditions in order to avoid having patients come into contact with individuals who may have contracted the Coronavirus, as well as to relieve pressure on overburdened medical facilities that may need to prioritize care of large numbers of patients being treated for COVID-19 or related ailments.  However, telemedicine and other virtual care services for other conditions not related to COVID-19 are not covered by the Notice.

Several states are requiring health insurers to cover Coronavirus testing, and in some cases, treatment, without cost-sharing or co-payments, and several insurers have voluntarily agreed to provide such benefits even in the absence of such state mandates.  Employers with self-insured group health plans are not subject to these mandates under the Employee Retirement Income Security Act of 1974, but may voluntarily agree to them.  In fact, many administrative services only (ASO) providers that manage self-insured plans on behalf of employers are proactively adopting these payment rules unless the employer sponsoring the plan affirmatively opts out.  Because benefits under these plans are funded by the employer, the employer will be responsible for the costs of COVID-19 testing and treatment if the deductible and other co-payment provisions are waived.  These opt-out notices should be closely reviewed, or the employer should contact the ASO directly, to confirm that the waiver of the deductible and other cost-sharing requirements for an HDHP are properly limited to apply only to testing and treatment of COVID-19.  For employers who do wish to provide such benefits, the Notice offers helpful guidance for doing so while keeping the HDHPs and HSAs compliant with the tax rules. 

If you have any questions on this Alert, please contact a member of our Employee Benefits and Executive Compensation team.