Sarah F. Bothma
COVID-19 Relief for High Deductible Health Plans
Updated: Mar 27, 2020
The IRS announced that high deductible health plans (“HDHPs”) with health savings accounts may be used to pay for COVID-19 testing* and treatment, even if participants have not met their deductible amounts.
A HDHP with a health savings account (“HSA”) is a health insurance plan that combines traditional medical insurance with a tax-favored savings account. Generally, a participant must first pay for non-preventative health care costs out-of-pocket, up to their deductible amount, before the plan covers those costs. If a plan qualifies as an HDHP, a benefit to its participants is that they can establish an HSA, which is funded with tax-deductible contributions (often referred to as pre-tax dollars because HSA contributions are deducted from an individual’s taxable income). Due to the restriction on payment of non-preventative health care costs by HDHPs until the participant has met their deductible, insurance providers were initially uncertain as to whether or not an HDHP could pay for COVID-19 testing and treatment costs if a participant had not met their deductible without being disqualified as an HDHP.
In order to eliminate potential financial barriers to COVID-19 testing and treatment, the IRS Notice 2020-15 (the “Notice”) announced that the IRS is waiving the minimum deductible requirements for HDHPs with respect to COVID-19 testing and treatment. HDHPs are now permitted to pay for costs related to COVID-19 testing and treatment for their participants, whether or not the participants have met their minimum deductibles. Such COVID-19 related expenses will be disregarded for purposes of determining whether a plan is a HDHP and whether its participants are eligible to make tax-deductible contributions to their HSAs. This means that participants will have little to no out-of-pocket expenses if a HDHP opts to cover all or some of the costs associated with COVID-19 testing and treatment, even if they have not yet met their deductible for the year, and participants can continue to make tax-deductible contributions to their HSAs.
The Notice only permits, and does not require, that HDHPs cover the costs associated with COVID-19 testing and treatment, therefore, group administrators for employers should check with their insurance provider to find out what COVID-19 related expenses are covered by their plan.
The Notice is available here.
As always, if you have any questions, please feel free to contact us here or call us at 585.258.2800.
You can view more COVID-19-related posts in our COVID-19 Resource Area here.
*The COVID-19 lab test is being offered free of charge, but other required diagnostic and medical services are not.