Reminders About Upcoming Changes to Healthcare Spending Related to the Pandemic

By EPIC | Originally posted here

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was enacted on March 27, 2020. The law permitted flexibility to healthcare spending related to high-deductible health plans (HDHPs). The CARES Act also modified the rules that apply to various tax-advantaged spending accounts so that additional items are considered qualified medical expenses which spending accountholders and plan participants may reimburse from those accounts. The spending flexibility permitted under the CARES Act expires on December 31, 2021. On March 11, 2020, the Internal Revenue Service (IRS) issued a notice allowing HDHPs to cover testing for, and treatment of, COVID-19 without a deductible or with a deductible below the applicable HDHP minimum deductible. Later that month, the IRS issued an announcement that expanded the list of qualified medical expenses reimbursable from tax-advantaged accounts. In addition, the IRS issued news releases informing taxpayers and plan sponsors about these changes to healthcare spending.

One of the contribution rules for Health Savings Accounts (HSAs) is that an individual must enroll in an HSA-qualified HDHP to receive or make contributions to their HSA.

An HSA-qualified HDHP must meet the annual deductible minimum and out-of-pocket maximum (OOPM) outlined by the IRS. A plan participant must pay for covered medical costs of at least that minimum deductible amount before their HDHP begins to cover any portion of the cost of medical expenses for the HDHP to be an HSA-qualified HDHP. For the 2021 contribution period that runs from January 1, 2021, to April 15, 2022, individuals with an HSA can contribute up to $3,600 in a self-only coverage account and $7,200 in a family coverage account. For the 2021 plan year, the HDHP minimum deductible is $1,400 for self-only coverage and $2,800 for family coverage. The 2021 plan year HDHP OOPMs are $7,000 and $14,000, respectively.

The CARES Act permitted HDHPs to cover telehealth without a deductible or with a deductible below the minimum annual deductible otherwise required by the Internal Revenue Code (IRC).

On June 17, 2020, IR-2020-122 explained that the CARES Act HDHP telehealth relief permits plan sponsors to amend their plan temporarily to include telehealth in the category of coverage that is disregarded for the purpose of determining whether an individual has other health plan coverage. The temporary permissible change allows otherwise HSA-qualified HDHPs to remain qualified for purposes of HSA contributions if the plan covers telehealth pre-deductible. Meaning, an individual enrolled in an HDHP that covered telehealth with no deductible, or with a deductible below the applicable minimum, may make tax-favored contributions to his or her HSA. The CARES Act created this temporary HDHP rule to promote remote access to healthcare due to the social distancing recommendations implemented during the COVID-19 pandemic. The temporary HDHP healthcare flexibility spending allowed under the CARES Act expires on December 31, 2021.

The IRS issued guidance, Notice 2020-15, stating that until further notice, HDHPs could cover the testing and treatment of COVID-19 with no deductible or with a lower deductible than the applicable HDHP minimum.

The IRS stated that it was granting relief to HDHP minimum deductible requirements in light of the COVID-19 pandemic emergency period. According to guidance in the notice, to eliminate any administrative and financial barriers to testing for and treating COVID-19, it is necessary to allow otherwise qualifying HDHPs to provide COVID-19 medical care services before a participant meeting the minimum deductible requirements. The notice permits pre-deductible coverage of any provider visits (in-person, urgent care, emergency room, telehealth or other visits) related to testing for and treatment of COVID-19. Accordingly, someone covered under HDHP that covers COVID-19 health benefits without a deductible is still eligible to contribute to an HSA. The IRS’s temporary deductible waiver rule covers only the testing and treatment of COVID-19 under an HDHP through the end of the declared COVID-19 public health emergency. The CARES Act rule suspending the deductible requirement for all telehealth services does not extend into 2022.