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Coronavirus health emergency: HDHPs can cover testing with HSA

Federal, state, and local governments are making new rules and exceptions to existing laws to more effectively combat the coronavirus health emergency. This includes the way high-deductible health plans cover testing and treatment, per the IRS.

HDHPs integrated with HSAs are now permitted to cover COVID-19 testing during Coronavirus health emergency.

High-deductible health plans can now cover pre-deductible Coronavirus tests and more.

NEW: HDHP relief made retroactive

IRS Notice 2020-29, released May 12, 2020, makes the provisions detailed in this post retroactive to include Coronavirus-related medical expenses incurred from January 1, 2020, to December 31, 2020.

Coronavirus health emergency screening is costly

Early in the coronavirus health emergency, people were concerned about the costs incurred for testing, especially those with high cost-sharing requirements, such as deductibles and co-pays.

The Trump administration responded quickly with an announcement that all health insurers had agreed to cover those costs.

This is a welcome relief to insured individuals with standard health policies.

But what about individuals that own a Health Savings Account (HSA) and are required to have a high-deductible health plan (HDHP), whose rules require higher deductibles and forbid insurance to pay any expense before the deductible is reached?

HDHP relief granted for COVID-19

Under existing rules at the time, paying for the coronavirus test when an insured had not yet met the annual deductible would cause the HDHP to no longer qualify as an HDHP, and that has broad tax implications for owners of HSAs.

Fortunately, the IRS is providing relief for COVID-19 testing under an HDHP. Under the new rule, explained in Notice 2020-15, High Deductible Health Plans and expenses related to COVID-19, HDHPs associated with HSAs are granted the flexibility to cover the cost of testing and to waive cost-sharing requirements for the coronavirus health emergency.

Also, the notice says, when a vaccine is available, it will be covered under the preventive care rules of all HDHP health insurance.

Permitted not required

It is important to know that this grants insurers the flexibility to do this without losing the HDHP’s qualification to serve as an eligible plan with an HSA. There is no requirement for them to do this, so check with the insurer as to whether their HDHP will cover these costs and what cost-sharing might apply.

Be sure to read Notice 2020-15 for the exact IRS language on this rule, and to consult your insurer for details on their coverage for medical expenses resulting from the coronavirus health emergency.

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