As reported in our September 24, 2024, Compliance Corner FAQ, employers that sponsor HDHPs paired with HSAs will no longer be able to provide first-dollar telehealth coverage to participants without negatively impacting their HSA eligibility. To the disappointment of many employers and employees, Congress did not extend the exception permitting first-dollar telehealth coverage in their recent temporary government funding legislation.
As background, for a participant to be eligible to make or receive tax-favored contributions to an HSA, the participant must be covered under a qualified HDHP and have no impermissible health coverage. In the context of HSA eligibility, impermissible coverage generally refers to any non-HDHP health coverage that provides “first dollar coverage,” meaning before the statutory minimum HDHP deductible is met unless an exception applies. For plan years beginning in 2025, the minimum HDHP deductible is $1,650 for self-only coverage and $3,300 for family coverage.
The telehealth exception was originally enacted in 2020 during the COVID-19 pandemic as a relief measure intended to increase participant access to healthcare without in-person contact risk. Due to its popularity, this optional relief was extended post-pandemic, most recently through the Consolidated Appropriations Act, 2023 (CAA 2023). The CAA 2023 relief expires for plan years beginning on January 1, 2025, and later. Note that for non-calendar year plans, the relief would continue for the remainder of the plan year that ends in 2025 (e.g., the relief would extend through June 30, 2025, for a plan year beginning July 1, 2024).
Absent further legislation to extend the telehealth relief for plan years starting in 2025 or later, providing telehealth coverage other than preventive care at no cost (or low cost) to participants will make them ineligible to make or receive HSA contributions. Thus, HDHP participants must be required to pay the cost of telehealth services until they meet the HDHP statutory deductible. Employers that previously offered no-cost (or low-cost) telehealth services pursuant to the relief should work with their plan service providers to amend their HDHPs to reflect this change. The change should also be communicated to participants, such as via a summary of benefits and coverage, which generally must be provided 60 days in advance of a material reduction in benefits, and an updated summary plan description or a summary of material modification.
Finally, it’s possible that the new 119th Congress will reinstate this telehealth relief, even retroactively. We will continue to monitor and report on these developments in Compliance Corner. However, as explained above, employers must recognize that under current law, the relief does not extend to plan years beginning on or after January 1, 2025, and ensure they take the appropriate measures to update their plan documents and communications accordingly.
For more information on HSAs and HDHPs, please ask your broker or consultant for a copy of the NFP publication Health Savings Accounts: A Guide for Employers.