Jun 29, 2023
HSA-Eligibility - Relief Ending for COVID-Related Expenses
June 2023
As the various COVID-related requirements and delays for group health plans are coming to an end, the IRS provided guidance last week via IRS Notice 2023-37 clarifying that coverage for the testing and treatment of COVID-19 is not considered preventive, and that such coverage provided prior to meeting the minimum deductible for a high deductible health plan (HDHP) will interfere with HSA-eligibility for plan years ending after December 31, 2024. The notice goes on to clarify that while the courts consider the preventive coverage requirements as disputed in Braidwood Management Inc. v. Becerra, items and services with an “A” or “B” rating by the United States Preventive Services Task Force (USPSTF) will qualify as preventive coverage for purposes of HSA-eligibility.
In addition to the guidance provided on preventive coverage and HSA-eligibility, the IRS took this opportunity to clarify the final date of the Outbreak Period. The notice makes it very clear that the agencies consider July 10, 2023 (not June 9, 2023) to be the end of the Outbreak Period which imposed delays for various ERISA, COBRA, and HIPAA deadlines.
Background
To be eligible to contribute to an HSA, an individual:
- Must be enrolled in a qualifying high-deductible health plan (HDHP);
- May not have any other “disqualifying coverage”; and
- Cannot be claimed as a tax dependent by another individual.
When determining whether other coverage is disqualifying, there is an exception for preventive coverage, as well as for permitted insurance and permitted coverage. Preventive coverage for purposes of determining HSA-eligibility includes preventive services described in IRS Notice 2004-23 and preventive services required to be covered with no cost-sharing under the Affordable Care Act (PHSA §2713).
In addition, to encourage treatment for some chronic illnesses, 2019 IRS guidance expanded the definition of preventive care to include a short list of specified medical care services and items.
COVID-Related Testing and Treatment
Preventive coverage generally does not include any treatment or service intended to treat an existing illness, injury, or condition, and therefore does not include the testing and treatment of COVID-19. IRS Notice 2020-15 provided temporary relief during the recent COVID-related Public Health Emergency allowing HDHPs to provide coverage for the testing and treatment of COVID-19 without affecting HSA-eligibility. Group health plan coverage for COVID-19 diagnostic testing was generally required during the Public Health Emergency, while coverage beyond normal plan cost-sharing for COVID-19 treatment was optional.
Now that the Public Health Emergency has ended, most group health plans have chosen to discontinue providing more generous coverage for the testing and treatment of COVID-19 and instead have moved back to imposing the normal plan cost-sharing requirements. However, for any employers who have continued to offer HDHP coverage that provides COVID-related coverage prior to satisfying the required minimum HDHP deductible, HSA-eligibility will be unaffected for any plan years ending on or before December 31, 2024. For plan years beginning in February 2024 or later, unless a short plan year is involved, such coverage may not be provided prior to meeting the requirement minimum HDHP deductible or it will cause a loss of HSA-eligibility.
USPSTF “A” and “B” Ratings
The Affordable Care Act (ACA) requires non-grandfathered group health plans to cover preventive coverage without cost-sharing. This includes, among other things, evidenced-based items or services that have a rating of “A” or “B” in the current recommendations of the USPSTF. Such coverage requirements recommended by the USPSTF since the ACA went into effect are currently being challenged in a case moving through the federal court system. In the meantime, the IRS has clarified that coverage for items or services with an “A” or “B” rating from the USPSTF may be provided prior to meeting the minimum HDHP coverage without causing a loss of HSA-eligibility (even if coverage may be interpreted not to be required by the ACA).
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