Oct 14, 2024
Telehealth Relief Permitting HSA Eligibility Set to Expire 2025
Due to the 2023 Consolidated Appropriations Act (CAA 2023), plan sponsors are currently permitted to offer telehealth plans at no cost alongside a high deductible health plan (HDHP) without impacting HSA eligibility. This relief is set to expire with plan years beginning in 2025. Normally a telehealth plan (whether stand-alone or built into a group health plan) is disqualifying coverage and causes a loss of HSA eligibility unless the telehealth plan has a deductible or charges fair market value (FMV) each time participants use the service until the minimum deductible required for a qualifying HDHP is met. Therefore, unless congressional action occurs, beginning in 2025, offering a telehealth option that provides more than preventive care with no cost to participants will result in ineligibility to make or receive HSA contributions.
Background
Only eligible individuals can make contributions to an HSA. To be eligible to contribute to an HSA, an individual:
- Must be enrolled in a qualifying HDHP;
- May not have any other “disqualifying coverage”; and
- Cannot be claimed as a tax dependent by another individual.
Most medical coverage available to an individual prior to meeting the minimum statutory HDHP deductible will cause HSA ineligibility. There is an exception for preventive coverage, as well as for permitted insurance and permitted coverage, but most telehealth is considered disqualifying other coverage unless the coverage is limited to coverage for preventive care.
Telehealth Relief
To encourage individuals to avoid hospitals when appropriate during the COVID-19 health crises, Congress passed relief permitting coverage for telehealth and other remote care services outside the HDHP and before satisfying the deductible of the HDHP while maintaining HSA eligibility. Since that time such relief has been extended on multiple occasions.
Relief Timeline
- CARES Act and IRS Notice 2020-29: Relief for plan years beginning before 2022
- Consolidated Appropriations Act, 2022: Relief for April – December 2022
- Consolidated Appropriations Act, 2023: Relief for plan years starting in 2023 and 2024
Potential Congressional Solutions
Unless Congress acts to once again provide relief for telehealth, such plans will be considered disqualifying coverage for purposes of HSA eligibility. There appears to be bipartisan support for extending this relief beyond 2024 plan years, but it isn’t clear what this relief may look like or whether Congress will be successful in including it in end of year legislation. In the past, Congress has passed temporary relief provisions that come with an expiration date, most likely due to budgetary constraints. Congress could choose to provide another temporary extension of the relief. In contrast, Congress could decide to pass currently proposed legislation which would permanently disregard telehealth when determining HSA eligibility. However, with the upcoming election and the expiration date for the relief fast approaching, this seems unlikely. It is perhaps more likely that another temporary relief extension will be included in end of the year budget legislation.
Employer Action
Employers who intend to ensure that their employees remain HSA eligible during the 2025 plan year and beyond may need to prepare to make changes to their telehealth benefit offerings to preserve such eligibility. If further relief is not provided beyond 2025, there are at least two potential options for employers who offer an HDHP option:
- The simplest solution may be to remove access to telehealth programs entirely for those enrolled in the employer’s qualified HDHP.
- Alternatively, employers could choose to offer a telehealth program which charges FMV until the minimum HDHP deductible is met.
FAQs
Can employers continue offering telehealth at zero cost to HDHP participants for 2025 plan years?
Yes, but unless relief is extended, these individuals will not be eligible to make or receive HSA contributions. NOTE: Eligibility for an HDHP is different from eligibility to contribute to an HSA. Eligibility for the HDHP will depend upon the plan eligibility rules set by the employer and/or insurance carrier (e.g., averaging 30 or more hours of service per week), whereas eligibility to contribute to an HSA is determined by federal laws and regulations. Therefore, while an individual must be enrolled in a qualifying HDHP to be eligible to contribute to an HSA, an individual who is ineligible to contribute to an HSA could still enroll in HDHP coverage so long as the plan eligibility requirements are met.
Will HSA eligibility be lost as of 1/1/25 for participants of non-calendar year plans?
No, the current relief applies to plan years beginning in 2024. Non-calendar year plans will lose relief upon renewal in 2025.
If a co-pay is charged for the telehealth coverage, would that preserve HSA eligibility?
Fair market value is not defined in the regulations. Certainly, charging a co-pay of $15-25 per visit is better than nothing, but it may be hard to argue that $15-25 is the FMV for the visits.
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