Further Extension of Telehealth for Health Savings Accounts Signed Into Law

January 4, 2023

Congress recently passed and President Biden signed into law a $1.7 trillion governmental funding package (the 2023 CAA) that includes a provision to again temporarily allow plan sponsors that offer high deductible health plans (“HDHPs”) to provide first-dollar telehealth and other remote care services (waive the deductible) for plan years beginning after 12/31/22 and before 1/1/25, without causing participants to lose health savings account (“HSA”) eligibility. This Update is of interest to plan sponsors with HDHPs who may want to take advantage of this optional relief. The details are herein.

Telehealth HSA/HDHP – General Rule
For an individual to be eligible to make or receive contributions to an HSA, the individual must be covered by an HSA-qualified HDHP. Typically, this type of HDHP cannot pay for covered services, except for specified preventive care, until the participant meets the plan’s deductible. Coverage provided under the HDHP before the minimum deductible is satisfied would make plan participants ineligible to make or receive HSA contributions, and failure to follow the rules could result in a portion of an employees’ HSA contributions being subject to income taxes and penalties. Therefore, under the general rules, a telehealth program is not compatible with an HSA unless the HDHP charges a fair market value (FMV) fee each time a participant uses the telehealth service until the minimum deductible required for the qualifying HDHP is met.

Temporary Relief Granted
Temporary relief from this requirement was provided in 2021 through the Coronavirus Aid, Relief, and Economic Security (CARES) Act, and then extended through 12/31/22 in the 2022 Consolidated Appropriations Act (CAA). Now the 2023 CAA has further extended this temporary relief permitting employees with HSAs to participate in a calendar year telehealth plan with no cost-sharing and remain HSA eligible for the 2023 and 2024 calendar plan years. For non-calendar year plans, there will be a gap in the relief starting 1/1/23 as the new relief in CAA 2023 does not begin until the start of the 2023 plan year. Below is a history of the relief granted over the last few years:

• The 2020 CARES Act added an exception permitting sponsors of HDHPs to offer telehealth services at no cost to participants, regardless of the plan’s annual deductible, without impacting participant HSA eligibility, for the period from 1/1/20 through the last day of the plan year beginning in 2021 (e.g., 12/31/21 for calendar year plans; 6/30/22 for a plan year that began 7/1/21).

• The 2022 CAA extended the CARES Act provision starting 4/1/22 and through 12/31/22. For plan sponsors adopting this optional extension, this left as much as a three-month gap from 1/1/22-3/31/22 in which the standard deductible would still apply. So, for example:

• • Calendar year HDHPs had a three-month gap from 1/1/22-3/31/22, so these plans should have ended the deductible waiver for telehealth services as of 12/31/21 and could start the deductible waiver for telehealth services received on or after 4/1/22 and through 12/31/22.

• • Non-calendar year HDHPs whose 2021 plan year ended before 3/31/22 (e.g., 3/1/21-2/28/22 plan year) had a gap through 3/31/22, so these plans should have ended the deductible waiver for telehealth services occurring after the end of the 2021 plan year. They could again start the deductible waiver for telehealth services received on or after 4/1/22 and through 12/31/22.

• • Non-calendar year HDHPs whose 2021 plan year ended on or after 3/31/22 (e.g., 5/1/21-4/30/22 plan year) had no gap from 1/1/22-3/31/22 because the original CARES Act waiver of the deductible for telehealth services continued until no later than 12/31/22.

• The 2023 CAA has now further extended this temporary relief as follows:

• • Calendar year HDHPs have no gap because the 2022 CAA waiver of the deductible for telehealth services continued until 12/31/22, so employees with HSAs can participate in a calendar year telehealth plan with no cost-sharing and remain HSA eligible for the 2023 and 2024 calendar plan years.

• • Non-calendar year HDHPs will have a gap in the relief starting 1/1/23 as the 2022 CAA telehealth/HSA relief ended as of 12/31/22, but the 2023 CAA does not begin until the start of the 2023 plan year. So, from 1/1/23 until the start of the 2023 plan year, employees must either be excluded from the telehealth program or must pay a FMV fee each time they use the telehealth service until they have incurred medical expenses at least equal to the minimum required HDHP deductible. Then from the start of the 2023 non-calendar year plan, employees can once again participate in the telehealth program and/or the FMV fees may be discontinued for the 2023 and 2024 non-calendar year plan year.

Next Steps
The relief provisions are optional, so it is left to each plan sponsor with an HDHP to determine whether to adopt the deductible waiver for telehealth (fully insured carriers will make the determination and self-insured plan sponsors must coordinate with their TPA/stop-loss provider in order to implement the plan design changes as deemed appropriate). Note too that if the IRS fails to issue guidance closing the non-calendar year plan gap, employers may also want to consider charging FMV fees on their telehealth programs for the 2023 gap period.

Conner Strong & Buckelew will provide alerts and updates as new information becomes available. Please contact your Conner Strong & Buckelew account representative toll-free at 1-877-861-3220 with any questions. For a complete list of Legislative Updates issued by Conner Strong & Buckelew, visit our online Resource Center.