Government Funding Bill Extends Honeymoon for HDHPs and Telemedicine
As employer-sponsors of high deductible health plans (“HDHP”) are aware—and as further explained below—offering a telemedicine benefit in conjunction with an HDHP is problematic because, unless structured properly, the telemedicine benefit may jeopardize the HSA eligibility of participants in the HDHP.
Under the CARES Act, the federal government offered temporary relief to this problem by allowing HDHPs to provide telemedicine benefits (and other remote care services) at no cost to participants before the satisfaction of the minimum HDHP deductible without causing a participant to lose HSA eligibility. This relief under the CARES Act only applied for plan years beginning on or before December 31, 2021. In other words, for plan years beginning on or after January 1, 2022, this CARES Act relief no longer applied.
In the government funding bill signed by President Biden on March 15, 2022, the federal government extended this CARES Act relief through December 31, 2022.
The Problem with HDHPs and Telemedicine Benefits
In order to be HSA eligible, an individual must satisfy two requirements: (1) be enrolled in an HDHP; and (2) with limited exceptions, not be covered under any health plan that is not an HDHP. A telemedicine benefit generally constitutes a health plan and doesn’t fit within any of the statutory exceptions. As a result, providing no cost (or below cost) access to a telemedicine benefit to participants in a HDHP before the participant satisfies the Internal Revenue Code’s (the “Code”) minimum deductible for HDHPs—currently $1,400 for self-only coverage and $2,800 for family coverage—will cause the participants in the HDHP to be HSA-ineligible.
There are various, less than perfect, solutions to this issue such as charging participants the “fair market value” for any telemedicine benefit that a participant uses before satisfying the minimum deductible or excluding HDHP participants from accessing the telemedicine benefit. The first solution often creates administrative issues because telemedicine benefit vendors rarely have access to an HDHP participant’s deductible accumulator or doesn’t maintain a master charge list of the fair market value of each telemedicine benefit. (Note: Some telemedicine vendors will charge HDHP participants a flat fee amount for each telemedicine benefit. However, it appears to be an aggressive interpretation that the fair market value of each telemedicine benefit is the same.) The second solution will often exclude a significant number of employees (and their dependents) from accessing the telemedicine benefits, which have become even more popular in light of COVID-19.
The FFCRA Makes the Problem More Complicated
This problem was further exacerbated by the Families First Coronavirus Response Act’s (“FFCRA”) requirement to cover COVID-19 diagnostic testing without participant cost-sharing in all settings, including remote settings such as under a telemedicine benefit. Telemedicine vendors voiced concerns over the difficulty in determining when a telemedicine visit included COVID-19 diagnostic testing and was subject to the FFCRA requirement and when a telemedicine visit did not include COVID-19 diagnostic testing and was not subject to the FFCRA requirement. In response, many telemedicine vendors began offering all telemedicine visits with no participant cost-sharing. This, of course, concerned many employer-sponsors of HDHPs that covering all telemedicine visits with no participant cost-sharing would jeopardize HDHP participants’ HSA eligibility.
The CARES Act’s (Temporary) Solution
The CARES Act temporarily resolved this problem by creating a “safe harbor” that allowed HDHPs to cover all telemedicine benefits before the satisfaction of the Code’s minimum deductible for HDHPs without jeopardizing the HDHP participants’ HSA eligibility (see our previous client alert here). This temporary relief expired for plan years beginning on or after January 1, 2022.
Temporary Extension of the CARES Act’s (Temporary) Solution
The government funding bill recently passed by Congress and signed by President Biden on March 15, 2022 extends the same relief under the CARES Act from April 1, 2022 through December 31, 2022. As a result, an HDHP can cover all telemedicine benefits without imposing the Code’s minimum HDHP deductibles on the telemedicine benefits from April 1, 2022 through December 31, 2022.
Here are some comments about this extension:
- The relief is permissive, not required. While a telemedicine benefit must still provide coverage of COVID-19 diagnostic services without participant cost-sharing, there is no requirement that other (non-ACA-required preventive care) telemedicine benefits be provided without participant cost-sharing.
- The relief is extended on a prospective basis. In other words, depending on a HDHP’s plan year, there may be a gap in which this relief is not applicable. Consider, for example, an HDHP with a calendar year plan year. The relief would not apply for the period of January 1, 2022 through March 31, 2022. As a result, for any telemedicine visits that occurred during this period that were not related to COVID-19 (or other preventive care), the HDHP must apply the Code’s minimum deductible requirements.
- The relief applies on a monthly basis, not on a plan year basis. The relief under the CARES Act applied to “plan years beginning on or before December 31, 2021.” Under the government funding bill, the relief applies “in the case of months beginning after March 31, 2022, and before January 1, 2023.” As a result, for HDHPs with non-calendar year plans that take advantage of the extended relief, the HDHP will need to make a mid-year change to subject non-COVID-19-related (or non-ACA-required preventive care) telemedicine visits on or after January 1, 2023 to the Code’s minimum deductible requirements (unless the relief is again extended).
We suspect that this extended relief will be welcome by most employer-sponsors of HDHPs that also offer a telemedicine benefit (but also frustrating that the extension of the relief is temporary).
If you have any questions about this article, please contact the author or another one of the Miller Johnson employee benefit attorneys.