The increased use of telemedicine in the wake of the coronavirus pandemic could create problems for the tax-favored status of health savings accounts.
“Many plans are now providing telemedicine services without cost sharing to encourage participants to stay home as much as possible,” Jessica Kuester of Ogletree, Deakins, Nash, Smoak & Stewart PC said March 25 during a webinar hosted by her firm. “That’s no problem for most plans — they’re permitted to waive those co-pays, coinsurance, and deductibles. However, it does raise an issue for HSA plans.”
In an HSA-compatible plan, waiving costs before the deductible is met can jeopardize the HSA’s eligibility for participants, Kuester said.
The IRS issued Notice 2020-15, 2020-14 IRB 1, on March 11, which said that providing benefits for testing for and treating COVID-19 without a deductible won’t violate the rules for high-deductible health plans and HSAs.
Kuester said this means HSA-compatible plans can waive cost sharing for telemedicine related to coronavirus testing and treatment.
“The problem is that many telemedicine administrators can’t differentiate between coronavirus-related visits and non-coronavirus-related visits,” Kuester said. If telemedicine services are provided for the latter, the HSA could be in trouble, she said.
“The important thing here is to communicate with telemedicine providers and try to work through how this coverage can be provided and whether it can be provided given the outstanding IRS rules,” Kuester said.
ACA Issues
The affordability rules under the Affordable Care Act are another potential challenge for health plans because of the coronavirus. One of the safe harbors for determining if health coverage is affordable is based on an employee’s Form W-2 wages.
Kuester said some employers manage the cost of coverage based on the expected Form W-2 wages of employees, and that sometimes there’s little room for error.
“Unpaid leaves will have the effect of reducing W-2 compensation for certain groups of employees, and this could cause coverage to become unaffordable for certain employees when the employer thought that the coverage would be affordable,” Kuester said.
Kuester also noted that determining whether an employer is considered an applicable large employer under the ACA is based on the average number of full-time employees in the prior year.
“With many employees being placed on leave or being terminated, employers close to that 50-employee threshold may find themselves losing [applicable large employer] status in 2021,” Kuester said. “This affects the requirement to provide coverage and ACA reporting requirements.”