OBBBA Telehealth Relief for HSA-compatible HDHPs
Recent COVID-Related Telehealth Relief History
CARES Act
In response to the COVID-19 pandemic, Congress enacted the Coronavirus Aid, Relief, and Economic Security Act in 2020 (CARES Act), which created a safe harbor relief provision permitting HSA-compatible HDHPs to cover telehealth and remote care services on a first-dollar basis, or prior to members satisfying their HDHP deductible.[14]
This safe harbor relief allowed HDHPs to offer telehealth and other remote care services without violating IRS “first-dollar rules,” which require HSA participants to satisfy their deductible before receiving most non-preventive services coverage. This telehealth safe harbor relief under the CARES Act expired on December 31, 2021.
CAA 2022
The Consolidated Appropriations Act of 2022 (CAA 2022) reinstated the telehealth safe harbor relief for 2022 from April 1, 2022, to December 31, 2022. The CAA 2022 reinstatement meant that non-preventive telehealth services received from January 1, 2022, to March 31, 2022, were still required to satisfy the HDHP deductible to preserve HSA eligibility.
CAA 2023
Subsequently, the Consolidated Appropriations Act of 2023 (CAA 2023) extended the telehealth safe harbor relief for HSA-compatible HDHPs from January 1, 2023, until December 31, 2024.
REMINDER: CAA 2023 Non-Calendar Year Gap
The language in CAA 2023 created a gap in telehealth relief for non-calendar plan years from January 2023 until the month in which the 2023 plan year begins, where non-preventive telehealth services was subject to the plan’s deductible.
Example: A non-calendar year plan that started on April 1, 2022, and ended on March 31, 2023, had a gap in the telehealth safe harbor relief, in which the HDHP deductible for non-preventive telehealth services applied from January 1, 2023, to March 31, 2023.
OBBBA
The OBBBA provides permanent safe harbor relief allowing HSA-compatible HDHPs to cover telehealth and other remote care services on a pre-deductible basis without jeopardizing an individual’s ability to make or receive HSA contributions.
As with the prior related legislation over the past several years, employers are permitted (but not required) to cover telehealth services at no cost to HDHP enrollees. Moreover, employers with HSA-compatible HDHPs can decide whether to adopt (or reinstate) this telehealth safe harbor relief for the 2025 plan year since the OBBBA permits a retroactive effective date starting with the 2025 plan year, considering the potential cost impact to the plan.
Employers sponsoring group health plans should take into account that plan participants continue to value telehealth and remote care coverage for convenience purposes. As such, reinstating this telehealth safe harbor relief in 2025 will likely be a welcome development for those HSA-compatible HDHP participants, particularly since it expired at the end of 2024.
Employer Group Health Plan Sponsor Considerations
Employer group health plan sponsors who imposed cost-sharing on telehealth and remote care services for their HSA-compatible HDHPs in 2025 will now have the option to reinstate (or offer) those services at no cost prospectively (or even retroactively) for the 2025 plan year. Consult with your applicable insurance carrier or third-party administrator (TPA) to evaluate the operational logistics of reinstating this relief, either on a prospective or retroactive basis. Be sure to consider the potential operational challenges, including re-adjudicating telehealth claims, of retroactively reinstating this relief back to January 1, 2025, in conjunction with your applicable carrier/TPA.
- Employer Decisions:
- Employers sponsoring fully-insured HSA-compatible HDHPs will need to consult with their plan carrier to determine if the carrier will permit reinstatement of telehealth/HSA relief for the 2025 plan year and going forward.
- Employers sponsoring self-funded HSA-compatible HDHPs will need to coordinate with their plan’s third-party administrators (TPA) to decide if they will reinstate this relief for 2025 and going forward. When making this decision, self-funded plan sponsor employers should consider not only the cost impact to the plan, but also the employee relations angle of reinstating this popular plan design feature that continues to be valued by many plan participants.
- Communications/Plan Documents: Any changes to telehealth coverage, whether or not an employer group health plan sponsor decides to take advantage of this permanent telehealth/HSA relief, should be:
- Clearly communicated to employees, and
- Reflected in updates to the plan’s Summary Plan Description (SPD) or a Summary of Material Modification (SMM) notice, within the required timeframes.
eBen will continue to closely track further employee benefit-related developments in connection with the OBBBA, including publication of relevant implementing regulations and guidance, and provide updates as available. In the meantime, contact your eBen account team with any questions or contact us directly here.
[1] Click here for an eBen article with more details on this tax policy topic.
[2] A DPC arrangement is defined in 2020 proposed IRS regulations as a contract between an individual and one or more primary care physicians (as further defined in the proposal) to provide medical care (as defined in section 213(d)(1)(A)) for a fixed annual or periodic fee without billing a third party.
[3] As defined in IRC Section 213(d)
[4] As defined in Section 1833(x)(2)(A) of the Social Security Act without regard to clause (ii) thereof.
[5] This amendment to the IRC required Congressional action (such as the OBBBA), which is why the current DCAP maximum contribution limits have not changed in many years, except for one temporary increase during the COVID-19 pandemic in 2021.
[6] As a reminder, if a DCAP is discriminatory, the benefits provided to highly compensated employees (HCEs) will be taxable, but the non-HCEs’ benefits will not be impacted.
[7] PFL insurance is a newer offering that is primarily utilized by smaller businesses to offer paid leave benefits to their employees and is available in a growing number of states.
[8] Currently, an employer must spend at least $600,000 on child care-related expenses to receive the full credit, and the credit has not changed since its creation in 1986.
[9] With this new provision, a business must spend at least $1.25 million on child care-related expenses to receive the full credit.
[10] With this new provision, a small business must spend at least $1.2 million on child care-related expenses to receive the full credit. An eligible small business is one that meets the gross receipts test under Internal Revenue Code section 448(c) for a five-year period.
[11] Adjusted for inflation beginning after 2027.
[12] Trump Account Contribution Programs’ eligibility rules, contributions, or benefits cannot discriminate in favor of highly compensated employees or their dependents.
[13] Trump Accounts may be established for children not born within this four-year period, although they will not be eligible for the federal government’s $1,000 benefit.
[14] Internal Revenue Code Section 223(c)(2)(E).
The contents of this article are for general informational purposes only and eBen makes no representation or warranty of any kind, express or implied, regarding the accuracy or completeness of any information contained herein. Any recommendations contained herein are intended to provide insight based on currently available information for consideration and should be vetted against applicable legal and business needs before application to a specific client.
