Due to the recent COVID-19 (coronavirus) outbreak, several state insurance commissioners, including Oregon, California, New York, Georgia, Maryland, and Washington, have recently issued directives to insurance carriers operating in their states to waive health plan cost-sharing, such as co-payments, coinsurance, or deductibles, for in-network COVID-19 laboratory testing, and in some cases office visits and emergency room visits related to the illness. Other state insurance commissioners and the insurers they regulate, are expected to follow. Vice President Mike Pence, who has been charged with leading the federal government’s COVID-19 response, has announced that testing was deemed an “essential health benefit” within the meaning of the Affordable Care Act rules, which could impact individual and small group insurance plans, as well as Medicaid, but does not create new requirements for large group or self-insured employer health plans.
Employers with self-insured health plans are also exploring ways in which their health plan designs can be modified to make it easier for plan participants to seek testing and treatment for COVID-19 without incurring out-of-pocket expenses or surprise medical bills from out-of-network providers or facilities. Some of these solutions include waiver of copays, coinsurance, and deductibles; free home delivery of prescription drugs and liberalized prescription drug refill rules; and free or reduced-cost telehealth benefits.
One open question is how this expansion of coverage will impact an individual’s eligibility to make contributions to a Health Savings Account (HSA). Under federal tax rules, an individual is eligible to contribute to an HSA for any month if the individual is covered under a high-deductible health plan (HDHP) for such month, and has no other disqualifying coverage or insurance. The Internal Revenue Service (IRS) has previously issued guidance that an HDHP may provide first-dollar coverage for preventive care benefits without disqualifying an otherwise HSA-eligible individual. Guidance dating back to 2004 includes a list of safe-harbor preventive care screening services that can be considered preventive care for this purpose, including certain types of infectious disease screenings. However, this guidance does not extend to treatment for a disease that has already been diagnosed.
HSA guidance issued by the IRS in 2004 [Notices 2004-13 and 2004-50] provided safe harbors for covering preventive services for plan participants without any out-of-pocket expenses. Additionally, guidance issued in 2019 [https://www.irs.gov/pub/irs-drop/n-19-45.pdf] further expanded the list of preventive services that can be provided first dollar under an HDHP without any out-of-pocket expenses, including prescription drugs for certain chronic conditions. Flu screenings are not listed. In addition, all of the guidance makes clear that preventive care generally does not include any service or benefit intended to treat an existing illness, injury, or condition. Employers are cautioned that without further guidance from the IRS, offering care and screening for COVID-19 without any out-of-pocket costs to the plan participant, will not fit squarely within an existing safe harbor and could jeopardize an individual’s HSA eligibility status. Similarly, waiving cost-sharing requirements for telemedicine services could also disqualify individuals from making HSA contributions.
At the time of this writing, we understand that several industry trade groups, insurers and state insurance commissioners have contacted the IRS to discuss expansion of the infectious disease screening safe harbor to include COVID-19 testing, and other ways in which the HSA preventive care safe harbor can be expanded to accommodate modifications to cost-sharing to address prevention and treatment of COVID-19.