We all know that one person who would rather tough it out than to actually go to a doctor to figure out what is going on with them. Compound this with a fear of not being able to afford the cost of the doctor’s services. But with COVID-19 out there, this type of reticence could be deadly for not only them but numerous other individuals as well.
It appears that the IRS agrees that now is not the time for cost of coverage to hinder an individual’s access to service and treatment. In IRS Notice 2020-15, self-insured high deductible heath plans (HDHPs) can include testing and treatment of COVID-19 as a preventive care. This means that such services and treatment can be paid by the plan before the individual reaches the statutory minimum high deductible amount and lose their health savings account (HSA) eligibility.
Before going forward, let’s go backwards to the basics. In order for a person to be eligible for an HSA, one of the requirements is that they must have an HDHP. The IRS sets an annual statutory minimum limit for HDHPs. For 2020, this limit is $1,400 for an individual and $2,800 for a family. What this means is that before the plan can pay its portion of claims, the individual has to reach the appropriate minimum high deductible amount for the coverage that they are enrolled within. In other words, the individual is on the hook for at least the $1,400 or the $2,800.
For some people, these high deductible minimums can be quite a financial burden. So this brings us back to our person above. Instead of getting needed health services, some people choose to do without as they simply cannot afford this expense.
This brings us back to IRS Notice 2020-15. Under this notice, self-insured HDHPs can cover the following services without worrying about the minimum high deductible:
Therefore, those in need and covered by such HDHPs will be able to get the care that they so desperately need at little to no cost.
It is important to note that IRS Notice 2020-15 is a “may” and not a “must.” This leaves employers with options on how to best proceed, such as:
If the employer chooses to make any changes to their plan, this will be an amendment that will increase coverage for employees. If the employer is subject to ERISA, a Summary of Material Modification (SMM) may be necessary if the change is to occur mid-plan year. Also, the plan’s Summary of Benefits and Coverage (SBC) must be also updated as this provision would affect coverage available below the deductible limit. As the SBC can also act as the SMM, this is probably the more prudent document to amend, especially as it usually must be provided at least sixty (60) days before any amendment goes into effect. However, the Department of Labor (DOL) has recently provided an exception for this advance notice only for amendments related to COVID-19 as it understands that most employers will want to adopt these changes sooner rather than later.
Although not addressed in the IRS’s notice, recent changes were also made to make OTC drugs more HSA, FSA and HRA-friendly. Prior to the Affordable Care Act (ACA), these reimbursement benefits could cover the cost for OTC medication. Such medications are commonly used by individuals for daily issues, such as non-prescription pain relievers and cold/flu medications. However, in 2011, OTC drugs were removed from the list of qualified medical expenses that were eligible for reimbursement. The CARES Act has now removed this barrier so that these common household medications, upon proof of purchase, may easily be paid for by one of these reimbursement options.
The addition of OTC medication as a qualified medical expense does not require any type of plan amendments. However, it would be a good idea for employers to communicate this modification to participants so that they may adjust their benefit spending appropriately.
For questions about your HDHP or HSA benefit plans, please contact us.
Health savings accounts (HSAs) have experienced substantial growth since they were first introduced in 2004. As employers look for more affordable ways to offer health coverage, an increasing number of employers have implemented high deductible health plans compatible with HSAs.
In two earlier posts, we discussed some common misconceptions regarding health savings account (HSA) eligibility and when an individual may contribute to an HSA. This week, we will focus on some of the myths associated with the other side of HSAs — how and when an individual may access his or her health savings account monies.
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