The IRS recently issued Notice 2023-37 (Notice) relating to pre-deductible coverage of COVID-19 testing and treatment under high-deductible health plans (HDHPs). Specifically, the Notice establishes a 2024 expiration date for previous IRS relief that allowed participants to contribute to health savings accounts (HSAs) even if the accompanying HDHP provided coverage for COVID-19 testing and treatment before meeting the deductible. The Notice also clarifies that testing for COVID-19 will generally not meet the HSA preventive care safe harbor for pre-deductible coverage of preventive care benefits.
Expiration of COVID-19 Relief for HDHPs
Under the Internal Revenue Code's HSA provisions, a participant must be covered under an HDHP and have no "disqualifying" health coverage (generally, coverage that pays benefits before the minimum deductible has been met).
In 2020, the IRS issued relief for HDHPs stating that, due to the unprecedented nature of the COVID-19 Public Health Emergency, an HDHP could provide pre-deductible coverage for testing and treatment of COVID-19 without running afoul of the HDHP minimum deductible rules. As a result, throughout the public health emergency, participants in an HDHP have not been disqualified from HSA eligibility solely because the HDHP provided coverage for COVID-19 testing and treatment before meeting the deductible.
The Notice ends the application of this relief. Because the public health emergency has come to an end, the Notice states that the 2020 relief for HDHPs is no longer needed. Accordingly, the 2020 relief for HDHPs applies only with respect to plan years ending on or before Dec. 31, 2024. This means that the relief expires on Dec. 31, 2024, for calendar year plans (and earlier for non-calendar year plans). For subsequent plan years, an HDHP is generally not permitted to provide pre-deductible coverage for testing and treatment of COVID-19.
COVID-19 Testing and Preventive Care Safe Harbor for HDHPs
The Internal Revenue Code's HSA provisions permit an HDHP to provide pre-deductible coverage for "preventive care" without jeopardizing an employee's HSA eligibility (often referred to as the preventive care safe harbor). Preventive care includes "screening" services, but generally does not include any service or benefit intended to treat an existing illness, injury or condition. IRS guidance listed an array of infectious diseases for which HDHPs can cover screening services on a pre-deductible basis under the preventive care safe harbor.
In the Notice, the IRS observed that screening for common and episodic illnesses (such as the flu) are not included in the aforementioned list of infectious diseases. Thus, in the IRS' view, COVID-19 differs from the types of infectious diseases included in the preventive care safe harbor. As a result, effective as of June 23, 2023, the preventive care safe harbor does not include screening (i.e., testing) for COVID-19. Note, however, that HDHPs can still provide pre-deductible coverage for COVID-19 testing under the 2020 relief described above (until that relief expires in 2024).
The Notice also adds an important caveat: If the U.S. Preventive Services Task Force (USPSTF) were to recommend COVID-19 testing with an "A" or "B" rating, under existing guidance, COVID-19 testing would then become subject to the preventive care safe harbor, and HDHPs could provide pre-deductible coverage for such testing.
End of COVID-19 Outbreak Period and Deadline Extensions
As described in March 2023 guidance issued by the U.S. Departments of Labor, Health and Human Services, and Treasury, the COVID-19 Outbreak Period will expire on July 10, 2023. (The expiration of the Outbreak Period is tied to the end of the COVID-19 National Emergency, which occurred on May 11, 2023.)
The expiration of the Outbreak Period will mean the end of an array of extended deadlines that have been in place since the early days of the COVID-19 pandemic, including certain deadlines relating to Health Insurance Portability and Accountability Act (HIPAA) special enrollment rights; Consolidated Omnibus Budget Reconciliation Act (COBRA) elections, payments and notices; and Employee Retirement Income Security Act (ERISA) benefit claims, appeals and external reviews.
Actions for Plan Sponsors
No midyear amendments are required in 2023 to reflect the end of the 2020 HDHP relief. However, summary plan descriptions (SPDs), summaries of benefits and coverage (SBCs), COBRA notices and forms, and other participant communications may need to be updated to reflect the end of the extended deadlines that applied during the Outbreak Period.
