On Wednesday, March 11, the Internal Revenue Service (IRS) in Notice 2020-15 published its first formal guidance addressing the developing public health emergency wrought by the novel coronavirus, COVID-19.  The Notice provides that a high deductible health plan (HDHP) that covers testing for and treatment of COVID-19 before satisfaction of the plan’s minimum deductible will not cause the plan to fail to be an HDHP, removing doubt as to whether such coverage would impair participants’ ability to make ongoing pre-tax health savings account (HSA) contributions.

Code Section 223 requires that to be eligible to make pre-tax HSA contributions, a taxpayer must participate in an HDHP.  The minimum deductibles for HDHPs in 2020 are $1,400 for individual and $2,800 for family coverage.  Questions arose as to whether an HDHP’s provision of COVID-19 tests without regard to these minimum deductibles would cause the plan to fail to be an HDHP, thus preventing participants from making pre-tax HSA contributions.  This became an immediate issue in light of the recent decision by several insurance carriers that symptomatic insureds will be eligible to receive a COVID-19 test as a 100% covered service, without regard to the plan’s deductibles or other out-of-pocket costs.

Notice 2020-15 provides the following important tax relief and guidance:

  • A health plan that otherwise satisfies the requirements to be an HDHP under Code Section 223 will not fail to be an HDHP merely because it provides “medical care services and items purchased related to testing for and treatment of COVID-19 prior to the satisfaction of the applicable minimum deductible”; and
  • Individuals participating in such HDHPs will remain “eligible individuals” under Code Section 223 for purposes of eligibility to make tax-favored HSA contributions.

The scope of the relief, particularly the scope of the services included in the relief as regards the “treatment of” the coronavirus, remains somewhat unclear at the present time.  Nonetheless, this can be viewed as a positive and helpful piece of guidance from the IRS.

Connecticut-Specific Relief

In Connecticut, on March 9, 2020, the Insurance Department issued a bulletin (Bulletin No. IC-39), which encourages (but does not require) health insurers and health care centers to waive any cost-sharing related to COVID-19 laboratory tests and related office visits and telehealth services, expand communications to participants around relief from the plan’s normal out-of-pocket expenses related to COVID-19 testing, and provide other coronavirus-related relief.  The State’s recommendations apply to fully-insured (rather than self-insured) health arrangements, as state oversight of self-insured health arrangements is generally preempted by the Employee Retirement Income Security Act (ERISA).

If you have any questions about how this or other guidance impacts your employer health plan, please contact any member of Shipman & Goodwin’s Employee Benefits group.