IRS Modifies HDHP Rules in Response to Coronavirus Concerns

Morgan Lewis - ML Benefits
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Morgan Lewis - ML Benefits

The IRS issued guidance on March 11 that clears the way for employers to offer employees covered by a high-deductible health plan (HDHP) testing and treatment for the 2019 Novel Coronavirus (COVID-19) with no deductible or at a lower deductible.

Under current law, a plan cannot be an HDHP unless it has a minimum deductible of $1,400 for self-only coverage and $2,800 for family coverage (in 2020). Employees must satisfy the applicable deductible before the plan pays any benefits.

Under IRS Notice 2020-15, a plan that otherwise meets the requirements of an HDHP and that offers coverage of medical services and supplies for the testing and treatment of COVID-19 with no deductible, or at a lower deductible, will still be considered an HDHP. Employees who are covered by such a plan will remain eligible to make tax-favored contributions to a health savings account (HSA).

According to the guidance, this relief is being extended “[d]ue to the unprecedented public health emergency posed by COVID-19, and the need to eliminate potential administrative and financial barriers” to testing and treatment. A vaccination, should one become available, will be considered preventive care, which can be offered under an HDHP without a deductible under existing law.

Employers should consult with their third-party administrators and insurers about the availability and implementation of special processing for COVID-19 benefits.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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