Recent legislation allows employers to continue offering first-dollar telehealth coverage without jeopardizing the ability to contribute to a health savings account (“HSA”), but only through the end of the 2024 plan year.

Background – HSA Eligibility

Employees can make and receive pre-tax contributions to HSAs to use for qualified medical expenses. To be “eligible” to make or receive contributions to an HSA, you (a) must be covered by a high deductible health plan (“HDHP”), and (b) may not have other non-HDHP coverage that covers benefits before the HDHP deductible has been met.

Certain types of coverage, like dental and vision care, is disregarded in determining whether an individual is “eligible” to contribute to an HSA. Disregarded coverage does not have to be coordinated with HDHPs. This means that participants can receive “first-dollar” coverage for disregarded coverage and still be eligible to make or receive contributions to an HSA.

Telehealth is Disregarded Coverage Through 2024

Under prior legislation, telehealth coverage provided (i) during plan years beginning before December 31, 2021; and (ii) during the period beginning April 1, 2022 and ending December 31, 2022, is disregarded coverage under the HSA rules. See the CARES Act and the Consolidated Appropriations Act, 2022.

This means that during those periods, HDHPs could cover telehealth visits and individuals could receive telehealth benefits before they met the HDHP deductible, without making them ineligible to contribute to an HSA.

New legislation extends this treatment. Telehealth coverage will continue to be treated as disregarded coverage for plan yearsbeginning after December 31, 2022, and before January 1, 2025. See Section 4151 of the Consolidated Appropriations Act, 2023.

Mind the Gap

For calendar year plans, this means that telehealth benefits can be offered on a first-dollar basis continuously from April 1, 2022 through December 31, 2024.

However, for non-calendar year plans, there is a gap. The extension of first-dollar coverage for telehealth benefits under the most recent legislation applies to “plan years” beginning after December 31, 2022. This means that a non-calendar year plan may have a gap between December 31, 2022 and the first day of the plan year beginning after December 31, 2022, during which telehealth benefits are not considered disregarded coverage.

Next Steps for Employers

Employers are not required to cover telehealth benefits before the HDHP deductible is met. However, if employers want to offer first-dollar coverage for telehealth benefits, they should take the following steps:

  • Review plan documents to determine whether plans should be amended.
  • Confirm with their TPAs/insurers whether, how, and when first-dollar coverage of telehealth benefits can be implemented.
  • Communicate coverage of telehealth benefits to plan participants.

Employers with non-calendar year plans, should consult with legal counsel to determine how to address the gap.