The IRS issued timely relief in response to the pleas of employers/plan sponsors that offer self-insured high deductible health plans (HDHPs) and are eager to amend their HDHPs to encourage COVID-19 testing and treatment. Under IRS Notice 2020-15, testing and treatment of COVID-19 can be provided below the high deductible threshold without changing the health plan’s status as an HDHP and without causing an individual’s loss of health savings account (HSA) eligibility.
This means that an HDHP can now provide the following services before the high deductible is satisfied without causing loss of HSA eligibility:
- Free COVID-19 testing (or testing at standard or reduced cost-sharing).
- Free COVID-19 treatment, including office visits, telemedicine visits, and hospitalization (or those COVID-19 services at standard or reduced cost-sharing).
The IRS also reminds us in Notice 2020-15 that vaccines are preventive care, so when a COVID-19 vaccine becomes available, it can be provided to participants with minimal or no cost-sharing before the high deductible is satisfied, without causing loss of HSA eligibility.
In response to this Notice, an employer that sponsors an HDHP may consider the following options:
- Status quo – do not amend the HDHP to pay for COVID-19 testing and treatment before the high deductible threshold is satisfied (but continue to apply the deductible and cost-sharing to such testing and treatment).
- Amend the HDHP to provide for free or low cost COVID-19 testing (but not free treatment).
- Amend the HDHP to provide for free or low cost COVID-19 testing and free or low cost treatment.
The above options are also considerations for an employer that sponsors a health plan that is not an HDHP.
Please note that recently introduced federal legislation would add COVID-19 testing as a “preventive health service” under the Affordable Care Act. If this becomes law, a non-grandfathered employer health plan would need to cover the full cost of COVID-19 testing at no charge to plan participants upon enactment (instead of waiting until the first day of the first plan year after the preventive care recommendation is issued).
After deciding whether and how to amend the health plan, the employer/plan sponsor must:
- Amend health plan terms.
- Seek approval of the plan amendment from any stop loss carrier.
- Ensure participants are properly notified of the change. While any plan changes would be enhancements to the benefits, a summary of material modifications (SMM) or restated summary plan description (SPD) should be distributed to participants.
- The plan’s summary of benefits and coverage (SBC) must be updated to reflect the change to plan coverage below the deductible limit (or without any cost-sharing). Technically, notice of material modifications to an SBC is supposed to be provided to participants no later than 60 days prior to the date on which the change will be effective (although we anticipate employers will make their plan amendments relating to COVID-19 effective immediately, in spite of this SBC rule).