High-deductible health plan sponsors that charge HSA-eligible participants less than the fair market value of telehealth services need to consider changes now that the safe harbor relief has expired.
Benefits Administration and Outsourcing Solutions|Health and Benefits
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The telehealth safe harbor relief provided under the Coronavirus Aid, Relief, and Economic Security (CARES) Act expired on December 31, 2024. Without an extension, telehealth services beyond preventive care that are provided to employees for free or for less than fair market value or before the minimum annual deductible is met will generally be considered “disqualifying health coverage,” thus making the employee ineligible to contribute to a health savings account (HSA).
Background
The CARES Act established a temporary telehealth high-deductible health plan (HDHP) safe harbor that allowed HDHPs to provide telehealth or other remote healthcare services with no (or a lower) deductible. Under this safe harbor, these services were not considered disqualifying coverage for purposes of HSA eligibility.
The telehealth HDHP safe harbor initially applied for plan years beginning before 2022. The Consolidated Appropriations Act (CAA), 2022 extended it for months beginning after March 2022 and before 2023; the CAA, 2023 further extended it to plan years beginning after 2022 and before 2025. However, the safe harbor was not extended again by Congress and therefore lapsed on December 31, 2024.[1]
Note: For non-calendar year plans, the telehealth HDHP safe harbor continues for the rest of the plan year that ends in 2025 (e.g., for a plan year beginning July 1, 2024, the relief would extend through June 30, 2025).
Potential to restore the telehealth HDHP safe harbor
Congress could restore the telehealth HDHP safe harbor for plan years after December 31, 2024, though legislative action is not required. Congress previously allowed the telehealth HDHP safe harbor to lapse for several months in 2022. An extension could be enacted sometime in 2025, but this would leave a gap for plan sponsors and plan participants, unless Congress provides retroactive relief.
Going forward
Given the uncertainty of the future of the telehealth HDHP safe harbor, plan sponsors will need to discuss ongoing plan operations with legal counsel.
HDHP sponsors that offer telehealth or remote health services (beyond preventive care) and currently charge HSA-eligible participants less than the fair market value of the services will want to determine how to address changes in the HDHP after December 31, 2024. Options include:
Charging fair market value for telehealth services prior to the participant satisfying the HDHP’s minimum annual deductible
Providing telehealth services only after the participant’s HDHP deductible is satisfied
HDHPs are not required to waive their minimum deductible for telehealth and other remote services. Plan sponsors would need to administer and communicate a midyear change to take advantage of any potentially restored telehealth safe harbor.
For sponsors that assumed the safe harbor would be extended without a gap, HDHPs that cover telehealth during any gap without applying the minimum deductible would not be HSA-qualifying for those months. Some covered individuals may be able to avoid this consequence by using the “full contribution rule.” Under the full-contribution rule (also referred to as the “last-month rule”), employees can make the full (not prorated) annual HSA contribution based on their HDHP coverage tier as of December 1 of the coverage year, regardless of whether they had HDHP coverage earlier in the year; however, they must then remain HSA eligible through the end of the following calendar year. If they fail to do so, they must include the amount that exceeds the sum of the monthly limits in their gross income for the following year and pay the additional 10% penalty tax. So, the assistance provided by this rule may not be available to all affected plan participants because some may not be HSA-eligible on December 1, 2025, and others may not remain HSA-eligible throughout the subsequent 13-month testing period.
HDHP sponsors should review their plan’s coverage of telehealth services to determine if changes need to be made. Changes to telehealth coverage should be reflected in the plan document and clearly communicated to participants in a timely manner in compliance with the latest regulations.
