We’ve had numerous inquiries lately about telemedicine benefits. My clients most typically ask either “is this a group health plan?” or “is it just access to another provider?” Clearly, there is much confusion surrounding telemedicine benefits. Part of the problem is that the regulators have yet to issue guidance on how telemedicine should be treated. All we can do is take what is a very innovative benefit and figure out how it fits into a complicated, and sometimes outdated, regulatory framework.
Let’s start by agreeing that telemedicine benefits are pretty cool. With telemedicine, employees can usually see a doctor sooner than if they had to go to a doctor’s office. Also, employees are less likely to take time off work, which benefits the employee and the employer.
The core problem is that telemedicine programs provide medical care. Accordingly, in most cases they will be an ERISA group health plan, in which case they are subject to all group health plan requirements, such as the requirement to have a plan document and a summary plan description, COBRA, and HIPAA. IRS rules also apply.
In addition, group health plans that are not “excepted benefits” are subject to a lengthy list of Affordable Care Act (“ACA”) reforms. Failure to comply with ACA reforms can subject plans to penalties to the tune of $100 per day per affected participant. Some of the ACA reforms with which group health plans must comply include not having any annual or lifetime dollar limit on essential health benefits, having a maximum 90-day waiting period, coverage of children through age 26, and no cost sharing (such as copayments, coinsurance, or deductibles) for preventive health care services. A standalone telemedicine program could easily fail some, or all, of these requirements, which could subject the plan to massive excise taxes.
So the question may become — how to set up a telemedicine program to avoid potential excise taxes?
Excepted Employee Assistance Program (“EAP”)
One possible approach is to treat a telemedicine plan as an excepted employee assistance program (“EAP”). Under the final regulations, for an EAP to be an excepted benefit, it must satisfy four requirements.
First, the EAP cannot provide “significant benefits in the nature of medical care.” Unfortunately, the final regulations do not define this term, but state that the “amount, scope, and duration of covered services” should be taken into account.
Second, benefits under the EAP cannot be coordinated with benefits under another group health plan. This requirement has two separate elements:
Participants in another group health plan cannot be required to use and exhaust EAP benefits before being eligible for benefits under the other group health plan. This means that the EAP cannot be used as a gatekeeper for benefits under the other group health plan.
In addition, eligibility for benefits under the EAP cannot be dependent on participation in another group health plan. This means that the telemedicine program cannot be limited to only employees who participate in the employer’s medical plan.
Third, no employee premiums or contributions may be required as a condition of participation in the EAP.
Fourth, there can be no cost sharing under the EAP. Although the term cost sharing is not defined for this purpose, presumably, this means that participants cannot be required to pay copayments, deductibles, or coinsurance for telemedicine services.
An employer might easily structure a telemedicine program so it satisfies the second, third, and fourth requirements. However, the hardest requirement to satisfy may be the requirement that the EAP not provide significant benefits in the nature of medical care. If under a telemedicine program a participant can have unlimited visits, that could end up being very significant. Might having an annual limit on telemedicine visits help?
Also, keep in mind, even if the telemedicine program qualifies as an excepted EAP, it is still a group health plan and must meet the other rules that apply to group health plans.
Integrating a Telemedicine Program with the Employer’s Group Health Plan
If the telemedicine program does not qualify as an excepted benefit, a second option may be to make the telemedicine program part of the employer’s group health plan. Under this structure, the telemedicine provider would be treated like any other in-network provider under the group health plan. The whole arrangement would be set up to comply with the ACA mandates. This would require, for example, that telemedicine charges count toward the plan’s deductible and out-of-pocket maximum. In addition, telemedicine visits that deliver preventive care would have to be provided at no cost to employees.
Under this approach, the telemedicine program must be fully integrated with the group health plan so that the entire arrangement satisfies the ACA requirements. Otherwise, those horrendous excise taxes could apply.
Voluntary Plan Safe Harbor
A third option may be to structure the telemedicine program so that it is exempt from ERISA as a voluntary plan. A group health plan may meet the safe harbor for a voluntary plan if it satisfies the following four requirements:
no contributions are made by an employer or employer organization;
participation in the program is completely voluntary for employees or members;
the sole functions of the employer or employer organization, with respect to the program, are, without endorsing the program, to permit the insurer to publicize the program to employees or members, to collect premiums through payroll deductions or dues checkoffs, and remit them to the insurer; and
the employer or employer organization receives no consideration in the form of cash or otherwise in connection with the program, other than reasonable compensation, excluding any profits for administrative services rendered in connection with payroll deductions or dues checkoffs.
Many telemedicine programs may have trouble satisfying the voluntary plan safe harbor because, most often, it is the employer who is driving the train, setting it up, endorsing it, and paying many of the costs. Such an arrangement may fail the first and third requirements. However, there might be a way to structure a telemedicine program to meet the voluntary plan exception and, thus, not be subject to ERISA, COBRA, HIPAA, or the ACA mandates. In most cases, though, falling under the voluntary plan safe harbor may be a stretch.
Health Savings Account Issues
Another potential problem with telemedicine benefits is that if they are available to individuals who are otherwise eligible to make health savings account (“HSA”) contributions, this could cause such individuals to be HSA ineligible. Often, telemedicine is provided free of charge before an individual meets their deductible under a high deductible health plan. In that situation, it would cause the individual to be ineligible to make HSA contributions.
IRS Notice 2004-50 provides that an individual will not fail to be HSA-eligible solely because he or she is covered under an EAP, disease management program, or wellness program, so long as the program “does not provide significant benefits in the nature of medical care or treatment.” Some telemedicine programs might provide significant benefits in the nature of medical care, while some might not. When an employer integrates a telemedicine program with its group health plan, one way to get around this issue may be to make the employee pay the full cost of the telemedicine visit until they have met their deductible under the high deductible health plan.
Telemedicine is an exciting new development in the area of health care. Unfortunately, the regulations and guidance have not caught up to what is happening in the world. We are left trying to figure out how telemedicine fits in a very complicated regulatory scheme.
The word of caution here is that if you are thinking about implementing a telemedicine program, you must realize that most will be ERISA group health plans. Telemedicine done incorrectly can also render people ineligible to make HSA contributions. Accordingly, employers may wish to work with counsel who may help them navigate these rules in a careful and thoughtful manner.