COVID-19 spurs IRS relief for HDHPs, state insurance guidance

Connecticut Enacts Paid Family and Medical Leave

To encourage testing and treatment for the novel coronavirus (COVID-19), insurance regulators in several states have issued guidance to carriers and taken other urgent measures, such as expanding telehealth. According to CMS, COVID-19 testing and treatment are Affordable Care Act (ACA) essential health benefits (EHBs) covered by all state benchmark plans, but cost-sharing and preauthorization requirements can vary. Even before Congress took action, some states started requiring that insurers waive cost sharing for COVID-19 screening, which had raised concerns about potential loss of health savings account (HSA) eligibility for individuals with high-deductible health plans (HDHPs). In response, IRS Notice 2020-15 lets HDHPs cover COVID-19 testing and treatment free of cost, even if individuals have yet to satisfy their deductible. This GRIST provides brief summaries and links to state COVID-19 guidance for insurers, along with related considerations for employers.

COVID-19 issues for health plans

Just-passed federal legislation (HR 6201) requires group health plans and insurers offering group coverage or individual health insurance (including grandfathered plans) to provide COVID-19 testing — including related office, telehealth, urgent care center or emergency room services — without applying any cost-sharing, prior-authorization and other medical-management requirements. However, states have not waited for federal legislation and have issued their own insurance directives that may go beyond the federal cost-sharing ban for COVID-19 testing.

State insurance directives don’t apply to self-insured ERISA plans, but employers should update their health plans to meet the federal cost-sharing ban for COVID-19 testing and communicate that policy as soon as possible to employees. Employers with insured plans should confirm what other COVID-19 services the plan’s carrier will offer without cost sharing. The benefits of providing cost-free COVID-19 treatment and other services, like telemedicine, may outweigh the expense to employer-provided plans.

COVID cost-sharing waivers and HDHPs. State directives to cover the costs of COVID-19 screening or treatment without imposing any deductible had raised concerns about how compliance would affect individuals’ eligibility to make tax-deductible HSA contributions. The Internal Revenue Code allows tax deductions for HSA contributions if made by an individual who meets two conditions:

  • Has HDHP coverage that imposes a minimum deductible before paying a portion of benefits, except for preventive care
  • Does not have other disqualifying health coverage

IRS Notice 2004-23 provides a safe harbor for HDHPs to cover screening to diagnose certain infectious diseases on a predeductible basis, but coronavirus isn’t on that list. Now, Notice 2020-15 has expanded this cost-sharing relief to include COVID-19 screening, testing and treatment.

Telemedicine questions. First-dollar telemedicine can present similar issues but may qualify as an excepted benefit in certain cases. Industry stakeholders are seeking further clarification on telemedicine.

State-by-state action. Download the 11-page print-friendly PDF for brief summaries and links to state COVID-19 guidance for insurance carriers. Not all states have issued guidance, but more may do so in the near future. The article concludes with some considerations for employers.

Catherine Stamm
by Catherine Stamm

Principal, Mercer’s Law & Policy Group

Cheryl Hughes
by Cheryl Hughes

Principal, Mercer’s Law & Policy Group

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