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IRS Relaxes High-Deductible Terms for COVID-19 Testing and Treatment

Pre-deductible coverage for coronavirus won't affect HSA eligibility

A female doctor holding a piggy bank.

Updated on March 28, 2020

High-deductible health plans (HDHPs) can cover the costs of testing and treating the spreading coronavirus before patients spend up to their plan's deductible without losing the plan's status as an HDHP, the IRS announced March 11.

IRS Notice 2020-15 clarifies that an HDHP can provide benefits under the plan's deductible for medical care services and supplies to test for and treat COVID-19, the disease caused by the coronavirus. This change means individuals enrolled in an HDHP that covers coronavirus-related costs pre-deductible will remain eligible to contribute to a health savings account (HSA).

Generally, HSA holders can only make or receive contributions to an HSA that is linked to an HDHP with no disqualifying, pre-deductible coverage. The IRS designates which treatments can be excluded from the deductible, such as preventative care specified under the Affordable Care Act (ACA). Last July, therapies and medications used to treat certain chronic conditions were also recognized as preventive care eligible for pre-deductible HDHP coverage.

As in the past, any vaccination costs continue to count as preventive care and can be paid for by an HDHP outside the deductible, the IRS said. This would include any forthcoming COVID-19 vaccination.

However, Notice 2020-15 does not require HDHPs to cover tests and treatment for COVID-19 pre-deductible or to eliminate other kinds of cost sharing, so plan enrollees should check with their HR benefits manager or health insurance company about their coverage for lab tests and related services for diagnosis and treatment.

"This change [in pre-deductible coverage] is not required under federal tax law. Therefore, employers have the option to choose to adopt it. However, some states have taken steps to require insured plans to provide this coverage," noted Greta Cowart, a partner at law firm Jackson Walker.

"Employers with self-insured plans may consider whether to make such an amendment," she explained, and "if they so elect, must comply with all of the normal requirements for a change in the benefit plan coverage," such as amendment, summary of material modification (SMM) distribution, and working with the third-party administrator. 

Employers at the Forefront

"For many participants with high-deductible plans, the anticipated cost of care can cause them to skip getting the tests and care they need," said Kim Buckey, vice president of client services at DirectPath, a benefits education, enrollment and health care transparency firm. "Covering both tests and treatment reassures participants that they can get needed care without breaking the bank and will hopefully encourage those who are symptomatic to see their doctors and get tested."

"Employers have already been at the forefront of voluntary action to protect the safety and health of their employees and families by removing cost barriers to care," said James Klein, president of the American Benefits Council, an employers group. The new guidance "gives companies the assurance they needed to ensure that [testing and treatment] can be provided at no cost to covered beneficiaries."

Employees should understand how the plan is defining testing and treatment (e.g., just the test, or the office visit and the test, as well as hospitalization costs), Buckey advised, as "there may be associated office visit costs they may be expected to pay under an HDHP plan."

Steve Wojcik, vice president for public policy at the Business Group on Health, an association of health plan sponsors, agreed that employers with HSA plans may want to assure that employees and plan participants who are exhibiting symptoms, or who have been potentially exposed, do not have any financial barriers to get tested or receive needed treatment. "Understanding how their health plan defines testing and treatment helps employees know what is covered and what, if any, out-of-pocket expenses they may incur," Wojcik said.

[SHRM members-only toolkit: Complying with and Leveraging the Affordable Care Act]

Telehealth Also Covered

"The decision by the IRS to allow HDHPs to pay for treatment of COVID-19 below the high deductible opens the door for employees and their dependents to, among other things, receive diagnoses and treatment for the coronavirus via telemedicine portals, with no cost sharing required," wrote Ed Fensholt, senior vice president and director of compliance services at Lockton, a benefits brokerage and consultancy. Without the new relief, "telemedicine provider would, we think, have had to collect the fair market value of the telemedicine visit from patients who had not yet met their high deductibles."

COVID Test Cost Sharing

Under the ACA, individual and small-group health insurance plans must cover essential health benefits, (EHBs) although enrollees may still be required to share the costs by paying deductibles and co-payments. On March 12, the Department of Health and Human Services posted FAQs on Essential Health Benefit Coverage and the Coronavirus (COVID-19), stating that EHBs "generally includes coverage for the diagnosis and treatment of COVID-19. However, the exact coverage details and cost-sharing amounts for individual services may vary by plan, and some plans may require prior authorization before these services are covered."

Large employer group plans and self-funded plans are not required to cover EHBs. However, a large group or self-funded plan cannot impose annual or lifetime dollar limits on EHBs.

Several states have now directed insurance carriers to waive all health plan cost sharing associated with COVID-19 testing—including California, New York, Georgia, Oregon, Maryland and Washington. For all fully insured health plans in these states, employees and family members will have scanning for COVID-19 covered in full by the plan without being subject to any deductibles, co-pays or co-insurance.

Self-insured health plans are not subject to state insurance mandates, which means the state cost-sharing directives for COVID-19 testing will not apply. Self-insured employers that desire to waive cost sharing for COVID-19 testing should consult with their third-party administrator and stop-loss provider to determine whether such measures are an option for the plan.

"Some insurers who administer claims for self-insured plans intend to administer the plans [without cost sharing for coronavirus testing] unless the sponsors opt out, while others will administer claims that way only if the sponsors affirmatively opt in," Fensholt explained. "Check with your claims administrator for its approach to this issue."

Health insurer Cigna, for instance, said it has sent letters on March 9 and 10 to their "administrative services only" clients giving them 10 business days to opt out of no cost coronavirus testing.

But Wojcik cautioned plan sponsors, "especially for the 'worried well,' no cost sharing could encourage unnecessary testing and exacerbate the current shortage of tests. At the moment, people who are referred to testing by their doctor may not be able to get tested until the current shortage ends and commercial lab testing capabilities ramp up."

Update: On March 18, President Donald Trump signed into law the Families First Coronavirus Response Act, which now requires employee group health plans maintained by any employer, regardless of size, to provide coverage without any cost-sharing requirements, such as deductibles, co-payments and co-insurance, or prior authorization or other medical management requirements, for:

  • The costs of a test to detect or diagnose the virus that causes COVID-19; or
  • Health care provider visits, including telehealth visits, urgent care and emergency room visits, that result in an order for or administration of a test to detect or diagnose the virus that causes COVID-19.

Federal funding will be provided for uninsured individuals to receive reimbursement for COVID-19 testing and related services.

In-Network or Out

Even plans that reduce or eliminate cost sharing for services received from in-network doctors and hospitals may require co-pays for care received from out-of-network providers, resulting in an unexpected bill. "Employees should check with their benefits and HR colleagues if they receive a surprise bill," Wojcik advised.

With respect to COVID-19 treatment, surprise billing could be an issue "if people need hospitalization and either have no choice on where to go" or are treated by out-of-network doctors in an in-network hospital. "It underscores the need for Congress to resolve this issue in a way that doesn't raise costs for patients and plans," he said.

Buckey noted that some plans no longer cover out-of-network care at all except in an emergency. "Sponsors of such plans should communicate to employees whether COVID-19 constitutes an emergency," she said. "At the very least, from an employee relations standpoint, employers should be getting out in front of this and letting employees know what they can expect and how those bills will be handled."

Update: The CARES Act Changes Rules for HSAs

The Coronavirus Aid, Relief and Economic Security (CARES) Act, passed by Congress and signed into law on March 27, allows HDHPs paired with HSAs to cover telehealth services prior to a patient spending up to the plan deductible. Normal cost sharing can still be imposed for telehealth visits, such as co-pays that the plan may require after the deductible is paid. This provision is temporary, and will sunset Dec. 31, 2020 unless Congress takes future action to extend it or make it permanent.

The act also lets account holders use their HSAs, health reimbursement arrangements (HRAs) or flexible spending accounts (FSAs) to buy over-the-counter medical products, such as drugs and surgical masks, without a prescription from a physician, and allows HSAs, HRAs and FSAs to pay for certain menstrual care products, such as tampons and pads, as eligible medical expenses. These are permanent changes and apply retroactively to purchases beginning on Jan. 1, 2020.

COVID-19 testing without cost sharing

The CARES Act goes further than IRS Notice 2020-15 by requiring that all testing for coronavirus (COVID-19) must be covered by both fully insured and self-insured plans without any cost sharing and outside the plan deductible, and that coverage extends to any services or items provided during a medical visit that results in coronavirus testing or screening —including an in-person or telehealth visit to a doctor's office, an urgent care center or an emergency room. This coverage requirement remains in effect only while there is a declared public health emergency as defined under federal law.

Related SHRM Articles:

Guidance Clarifies COVID-19 Diagnostic Testing Mandate,  SHRM Online, April 2020

Health, Wellness and Leave Benefits Help Employees with Coronavirus, SHRM Online, March 2020

Protect the Privacy of Employees with Coronavirus, SHRM Online, March 2020

IRS Allows Health Plans to Cover More Treatments Before Deductible Is Met, SHRM Online, July 2019


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