The IRS has taken action to ensure that COVID-19 testing and treatment are not deterred by the rules for high-deductible plans. Health Spending Accounts (HSA) coupled with High Deductible Health Plans (HDHP) have become a popular way to control the cost of medical care. One of the requirements of these arrangements is that until the statutory minimum deductible is satisfied, the individual cannot have other health coverage, referred to as "disqualifying health coverage."
While preventive care is permissible, such as a vaccination, any services beyond purely preventive care, such as testing or other treatment, may be "disqualifying coverage." This would place contributions to an HSA at risk, if the statutory minimum deductible had first not been satisfied.
On March 11, 2020, the IRS published Notice 2020-15 that addresses the rules for high-deductible plans with respect to testing and services related to COVID-19. Due to the unprecedented public health emergency and the need to eliminate both administrative and financial barriers with respect to testing and treatment, the IRS confirmed that any medical care services or items purchased with respect to testing for COVID-19 will not be considered disqualifying coverage that would place HSAs at risk. This means that a medical plan can provide services relating to the treatment or testing of COVID-19 without a deductible or cost sharing and without violating the rules governing HSAs and HDHPs.
If an employer has a self-insured plan, it may administer the plan to provide for such care without the need to satisfy the normal deductibles and co-pays. If your plan is insured, your State Insurance Commissioner may have already required modifications to your insurance carrier’s contract.
For example, the Washington State Insurance Commissioner issued Emergency Order No. 20-01, under which insurance contracts issued in Washington State must:
- Test for COVID-19 without application of any deductibles or co-pays;
- Allow one-time refills of prescriptions prior to the prescription expiration date so that enrollees can maintain an adequate supply;
- Eliminate the need for prior authorization for treatment or testing of COVID-19; and
- If the carrier has insufficient network providers, provide COVID-19 testing and treatment at Network rates.
Due to ERISA preemption of state insurance laws, an employer’s self-insured medical plan would not be subject to an Insurance Carrier’s Emergency Order. However, an employer may wish to operate its self-insured medical plan to provide similar coverage.
The facts, laws, and regulations regarding COVID-19 are developing rapidly. Since the date of publication, there may be new or additional information not referenced in this advisory. Please consult with your legal counsel for guidance.
DWT will continue to provide up-to-date insights and virtual events regarding COVID-19 concerns. Our most recent insights, as well as information about recorded and upcoming virtual events, are available at www.dwt.com/COVID-19.