COVID-19 (commonly referred to as the coronavirus) has been declared a pandemic by the World Health Organization. The disease is highly contagious, and has recently resulted in unprecedented measures being taken by both government and private industry intended to stem the spread of the virus, including in many cases providing for free testing and in some cases free treatment.

The provision of such services, however, complicates things for combination health savings accounts (HSA) and high-deductible health plans (HDHP), which is a common design for employer health plans that cover a significant portion of Americans. This design helps control employer costs, while continuing to provide tax favored health benefits to employees. However, the HDHP requirements can add some challenges, particularly where non-traditional benefits are offered, which may not be subject to the deductible. In order to take advantage of the tax benefits provided by an HSA, an individual must obtain no health coverage other than an HDHP and, with very limited exceptions, all medical benefits under the HDHP must be subject to payment of a substantial deductible before the plan pays any benefits.

This week, the Internal Revenue Service released formal guidance that indicated that, until further guidance is issued, providing benefits for the testing for or treatment of the COVID-19 virus without being subject to a deductible will not cause an otherwise compliant plan to fail to be an HDHP. This guidance alleviates concerns that such a design would disallow contributions to an HSA by or on behalf of an employee.

The guidance does not mandate that an HDHP provide for such a design. However, it does highlight the urgent public need for testing and treatment, and represents an attempt by the government to remove barriers to efficient and broad-based testing. The guidance makes clear that, other than the specific modifications described, all other requirements applicable to HDHPs remain in effect.

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