IRS Says COVID-19 Testing and Treatment May Be Covered by High Deductible Health Plans with No Participant Cost-Sharing
***Information and guidance in client updates was up to date at time of publication. During the pandemic, information and guidance has been changing rapidly. If you have any questions about the information contained in a client update, please contact the author(s) or your Miller Johnson attorney.***
Employers are scrambling to address the multitude of issues presented by the COVID-19 pandemic. So we will get directly to the point of this client alert:
On March 11, 2020, the IRS announced that a high deductible health plan (HDHP) may provide coverage for medical care services and items related to testing for and treatment of COVID-19 with no participant cost-sharing before the minimum deductibles are satisfied without jeopardizing the HSA-eligibility of individuals covered by the HDHP.
That IRS guidance is available here.
An increasing number of states have been requiring insurers of fully insured plans, including employer-sponsored group health plans, to provide coverage for COVID-19 testing and related services with no participant cost-sharing.
While self-funded employer-sponsored group health plans are generally not subject to state insurance requirements, we understand that many self-funded group health plan sponsors want to voluntarily cover these services without participant cost-sharing.
The goal of these measures, of course, is to encourage quick identification of individuals with COVID-19 and to ensure that those individuals receive immediate treatment.
The requirement to provide these services with no participant cost-sharing caused concerns for insurers and plan sponsors of HDHPs. If services related to testing for and treatment of COVID-19 didn’t constitute preventive care, then covering these services before the minimum deductibles for HDHPs under the Internal Revenue Code (the “Code”) were satisfied would automatically result in any individual covered by the HDHP to be ineligible to make (or receive on the individual’s behalf) HSA contributions (i.e., because the health plan would no longer be an HDHP). This same issue also caused concerns for employer-sponsors of self-funded HDHPs that wanted to voluntarily add coverage for these services without participant cost-sharing.
This IRS guidance is welcome relief. Without it, insurers and employers that added these COVID-19-related services to their plans without cost-sharing and before the minimum deductibles for HDHPs under the Code were satisfied did so at the risk that it may cause these plans to cease to be HDHPs. While the IRS guidance didn’t state that testing for and treatment of COVID-19 was “preventive care,” it did state the following:
Due to the unprecedented public health emergency posed by COVID-19, and the need to eliminate potential administrative and financial barriers to testing for and treatment of COVID-19, a health plan that otherwise satisfies the requirements to be an HDHP … will not fail to be an HDHP merely because the health plan provides medical care services and items purchased related to testing for and treatment of COVID-19 prior to the satisfaction of the applicable minimum deductible.
In other words, if an HDHP provides coverage for COVID-19 testing and treatment without participant cost-sharing before the minimum deductibles under the Code were satisfied, the HDHP will remain an HDHP and anyone covered by the HDHP who was otherwise HSA-eligible will remain HSA-eligible.
The COVID-19 pandemic is rapidly changing. We will continue to do our best to provide up-to-date information so that employers can tailor their response as appropriate. If you have any questions about this client alert, please contact a member of the Employee Benefits and Executive Compensation practice group.
To keep abreast of all our Coronavirus / COVID-19 information, please visit https://millerjohnson.com/coronavirus-covid-19/.