Congress extends HSA telemedicine benefit (again)

Let’s start 2023 with some good news that carried over from the very end of 2022. On December 29, 2022, President Joe Biden enacted¹ the Consolidated Appropriations Act, 2023 (CAA 2023)², a $1.7 trillion omnibus spending bill containing a number of important provisions, including a noteworthy extension of telemedicine coverage first introduced with the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) in 2020. Telemedicine, or telehealth, allows healthcare providers to provide clinical healthcare remotely via computer or over the phone.

For all the employers and benefits advisors reading this, I imagine the telehealth extension was something you were waiting to see. I know I was watching for it. Now that these services will continue to be covered in 2023, your people will be able to keep receiving medical care remotely—a benefit used by 37% of adults in 2021, according to the Centers for Disease Control.

Not only is telemedicine convenient and efficient, it can also improve access to healthcare for people who live in remote or underserved areas, or have mobility issues that make it difficult for them to visit a physical location for care. And, telehealth services can help to reduce the spread of infectious diseases by reducing the need for in-person visits.

When did the telemedicine healthcare relief start?

President Donald Trump signed the CARES Act into law on March 27, 2020, which brought emergency assistance and additional healthcare relief to Americans impacted by the 2020 coronavirus. Included in these was the provision allowing Health Savings Account (HSA)-qualified high-deductible health plans (HDHPs) to cover telemedicine and other remote care service expenses before the deductible was met and with no effect to a participant’s ability to continue to contribute to their HSA for plan years beginning on or before December 31, 2021.

On March 15, 2022, President Joe Biden enacted the Consolidated Appropriations Act, 2022, which – among other things – renewed this relief for the April 1, 2022 through December 31, 2022 coverage period irrespective of HDHP’s plan year and also amended Internal Revenue Code § 223 rules to provide that telemedicine and remote care services would be considered disregarded coverage (thereby not causing a loss of eligibility to contribute to an HSA) during those last nine months of 2022.

What do you need to know about the telehealth and remote care service relief extension?

Newly enacted provisions of CAA 2023 further extend these exceptions to allow plan sponsors offering HSA-qualified HDHPs to pay for these telemedicine and remote care service expenses before the deductible is met for plan years beginning after December 31, 2022 and before January 1, 2025. And such services will continue to be disregarded coverage during those plan years (meaning payment for such services will not cause a loss of eligibility to contribute to an HSA).

Mind the gap

It is noteworthy, however, that as written, the legislative language creates a potential gap for non-calendar year HDHPs. Section 4151 of the CAA 2023 (“Extension of Safe Harbor for Absence of Deductible for Telehealth”) states:

(a) IN GENERAL. – Section 223(c)(2)(E) of the Internal Revenue Code of 1986 is amended by striking “In the case of plan years” and all that follows through “a plan” and inserting “In the case of – ‘(i) months beginning after March 31, 2022, and before January 1, 2023,’ and ‘(ii) plan years beginning on or before December 31, 2021, or after December 31, 2022, and before January 1, 2025, a plan.’”

(b) CERTAIN COVERAGE DISREGARDED. – Section 223(c)(1)(B)(ii) of the Internal Revenue Code is amended by striking “(in the case of plan years beginning on or before December 31, 2021, or in the case of months beginning after March 31, 2022, and before January 1, 2023)’’ and inserting ‘‘(in the case of months or plan years to which paragraph (2)(E) applies).’’

(c) EFFECTIVE DATE. – The amendments made by this section shall apply to plan years beginning after December 31, 2022.

This verbiage, as written, seems to mean that non-calendar plan year HDHPs will have a gap in the relief beginning January 1, 2023 to the beginning of the 2023 plan year during which the CAA 2023 relief does not apply. Therefore, an HDHP with a plan year beginning (for example) March 1, 2023 could not offer “first-dollar” telemedicine or remote care service expenses from January 1 – February 28, 2023.

What actions should you take?

Plan sponsors of non-calendar year HDHPs should consider contacting their insurance providers to discuss their members’ potential loss of eligibility to contribute to an HSA during this gap period and what – if any – additional actions they wish to take to apply this relief. It’s possible that this is a drafting glitch; additional guidance from the Internal Revenue Service would be welcome.

These relief provisions are optional. While most insurance providers cover at least some form of telehealth service, members should contact their HDHP insurance provider for more information concerning specific telehealth benefits. Furthermore, sponsors of HDHPs that do cover reimbursement for telemedicine services who adopt this deductible relief for its HSA-qualified HDHP should communicate the specifics of this relief to their participants, as well as a communication near the end of 2023 to remind of the expiration of this relief provision (for calendar-year plans, this telemedicine and remote care service relief will expire December 31, 2024).

Parting thoughts

Compliance becomes clearer for employers through knowledge. It’s as easy as contacting HealthEquity for more information about its services, and your own accounting or legal sources for additional guidance.³