Telehealth & HSA-Eligibility – Is the Flexibility Coming to an End?
September 16, 2021
Telehealth has continued to grow in popularity, with employers commonly offering such services alongside traditional group medical plans, and sometimes offering the services more broadly as a stand-alone option. In some cases, employees are required to pay a copay that approximates the fair market value of such services, but more often the telehealth services are available at little to no cost as part of the group medical plan premium or sometimes subsidized by the employer.
To be eligible to contribute to an HSA, an individual:
- Must be enrolled in a qualifying high-deductible health plan (HDHP);
- May not have any other “disqualifying coverage”; and
- Cannot be claimed as a tax dependent by another individual.
While preventive coverage and other disregarded coverage (e.g., insurance for specified disease or illness, fixed indemnity coverage, dental, vision, long-term care) do not affect HSA-eligibility, most medical coverage available to an individual prior to meeting the statutory HDHP deductible ($1,400 for single/$2,800 for family in 2021 and 2022) will cause HSA-ineligibility.
For telehealth coverage available at no cost to the employee, there has been a lack of clarity as to whether such coverage impacts HSA-eligibility. Such services, which arguably replace a traditional office visit, likely provide significant medical benefits. Therefore, the more cautious approach was to assume that coverage of such services without requiring participants to pay fair market value prior to meeting the minimum HDHP deductible caused participants to be ineligible to contribute to an HSA.
Then in the CARES Act, due to the expanded need and use of telehealth during the COVID public health emergency, language was included that seems to confirm that coverage of telehealth prior to meeting the minimum HDHP deductible may be viewed as disqualifying coverage. The legislation provided temporary flexibility for plans to offer telehealth at a reduced cost, or no cost at all, prior to meeting the minimum HDHP deductible without causing a loss of HSA-eligibility. This was further explained and confirmed in IRS Notice 2020-29 – https://www.irs.gov/pub/irs-drop/n-20-29.pdf.
We are not aware of any extension of this relief, although that may still be provided. Without any further extension of this flexibility, for plan years beginning in 2022, individuals who enroll in the employer’s HDHP and who also have access to telehealth coverage at reduced or no cost prior to meeting the minimum HDHP deductible may not be eligible to contribute to an HSA.