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COVID-19: IRS Responds with Relief for High Deductible Health Plans

In response to the COVID-19 public health emergency, on March 11, 2020, the Internal Revenue Service (“IRS”) issued Notice 2020-15 entitled, “High Deductible Health Plans and Expenses Related to COVID-19.”[1]

The purpose of Notice 2020-15 is to help eliminate administrative and financial barriers for the testing and treatment of COVID-19.

The IRS has determined that until further guidance is issued, a health plan which otherwise satisfies the high deductible health plan (“HDHP”) requirements under IRC Section 223(c)(2)(A), will not fail to be an HDHP simply because the plan provides medical care related to COVID-19 prior to meeting the minimum deductible (self-only or family).

Therefore, individuals who are covered under an HDHP that provides free or reduced cost medical care related to the testing and treatment of COVID-19, prior to satisfying their deductible, will not fail to be health savings account (“HSA”) eligible.

As background, an individual is only eligible to establish and contribute to an HSA if they are covered under an HDHP and are not enrolled in any other disqualifying coverage.  Disqualifying coverage includes benefits that offer “first dollar coverage” before an individual meets their minimum deductible under an HDHP.  Examples of disqualifying coverage include:

  • General Purpose Flexible Spending Accounts;
  • Medicare; and
  • Certain Telemedicine Programs.

Such benefits would generally disqualify an individual from eligibility to make or receive tax-free contributions to an HSA.

However, there is a preventive care safe harbor, which allows HSA qualified HDHPs to set a lower deductible, or waive the deductible, for preventive care benefits.  Pre-deductible HDHP coverage for preventive care can include:

  • Routine prenatal and well-baby care;
  • Immunizations for children and adults;
  • Smoking cessation programs; and
  • Various screen services (ex: mammograms or glaucoma testing).

Under IRS Notice 2020-15, vaccinations will continue to be considered as preventive care.  In addition, an HDHP is permitted to cover all medical services received and items purchased in association with the testing and treatment of COVID-19.

This guidance does not modify previous guidance regarding HDHP requirements in any other respect.  It merely allows HDHPs to be flexible in providing benefits in the face of this pandemic without concern of deductible, cost sharing, or losing HSA eligibility.

Additional legislation and guidance are being issued on a daily basis to combat the COVID-19 epidemic.  This information is current as of the date it is issued; however, is subject to change due to legislative and regulatory action.

The content herein is provided for educational and informational purposes only and does not contain legal advice.  Please contact our office if you have any questions about compliance requirements applicable to your health and welfare plans due to COVID-19.

Dated:  March 24, 2020

[1]   IRS, High Deductible Health Plans and Expenses Related to COVID-19, https://www.irs.gov/pub/irs-drop/n-20-15.pdf, March 11, 2020, accessed March 12, 2020.

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