HSA and HDHP relief for Coronavirus COVID-19 benefits

High deductible health plans (HDHPs) may offer novel coronavirus (COVID-19) health benefits before the minimum deductible is met and not jeopardize HSA-eligible status.

June 26, 2020

HDHP clarification (Notice 2020-29) (Originally published in the May 20, 2020 edition of TAX in the News)

Notice 2020-15 released earlier this year provided that a high deductible health plan (HDHP) would not fail as a qualifying plan for HSA purposes because it offers medical care related to COVID-19 testing and treatment prior to satisfying the deductible. Notice 2020-29 clarifies that this HDHP relief applies with respect to expenses incurred on or after January 1, 2020 and includes expenses for diagnostic testing for influenza A and B, norovirus and other coronaviruses, respiratory syncytial virus (RSV), and any other items or services with zero cost sharing required by the FFCRA.

Also, an HDHP may cover telehealth services and other remote care services without a deductible or with a deductible below the minimum. Individuals remain HSA-eligible even if receiving such services outside of their HDHP coverage.

IRS news release IR-2020-25 & Notices Notice 2020-29, Notice 2020-33

Previous guidance on COVID expenses for HDHP and HSA purposes (Originally published in the March 18, 2020 edition of TAX in the News)

In Notice 2020-15 and accompanying news release, the IRS provides that a high deductible health plan (HDHP) may pay for novel coronavirus (COVID-19) health benefits before the minimum deductible requirements are satisfied.

HDHP relief for coronavirus is available for eligible individuals. Eligible individuals may deduct (or make pre-tax) contributions to HSAs. The individual must be covered by a qualified HDHP and have no disqualifying coverage. The HDHP must meet minimum deductible standards (in 2020, $1,400 for single coverage and $2,800 for family coverage). Generally, the HDHP may not pay “first dollar” benefits, that is, pay benefits before the minimum deductible is met. There are certain exceptions for preventive health benefits, such as yearly check-ups.

Under Notice 2020-15, an otherwise qualified HDHP will not fail to be an HDHP if it pays for coronavirus health benefits before the covered individual (and family, if applicable) satisfy the applicable minimum deductible. Individuals covered by the HDHP will continue to be HSA-eligible assuming all other requirements are met.

Heath benefits provided by an HDHP may include medical care services and items purchased related to testing and treatment. Vaccinations, should they become available, are treated as preventive care.

All other requirements for HSAs and HDHPs remain in place.

Find more information on HDHP relief for coronavirus on IRS.gov: IRS: High-deductible health plans can cover coronavirus costs

For more COVID-19 tax news coverage see the Insights article, "Coronavirus COVID-19 tax relief resources

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