Employers and employees alike are concerned about many aspects of how COVID-19 will impact their lives. One concern is how to pay for testing and treatment. The first indications of the way forward have come to light.
State Insurance Regulators Act
At least three states have directed insurance carriers to waive all health plan cost-sharing for COVID-19 testing. These states include California, New York and Washington. Others may follow shortly. Many small to medium-size employers provide health care benefits through insured arrangements, but most large plans are self-funded. State insurance regulators are precluded by ERISA from requiring self-insured plans to cover benefits.
Other Coverage Initiatives
COVID-19 testing has been available through the Centers for Disease Control and Prevention (“CDC”) at no cost. Testing is expanding and more commercial testing is available at a designated lab approved by the United States Food & Drug Administration. Cigna, the health care insurer and third party administrator for self-funded employer health plans, announced on March 10 that it would waive COVID-19 testing cost-sharing to self-insured plans it administers. The employee benefits press reports that all of Cigna’s self-funded or “administrative service only” plans have agreed to the change.
Health Savings Account and High Deductible Health Plan Relief from the IRS
With Notice 2020-15, the IRS has announced that high deductible health plans may provide benefits for testing and treatment of COVID-19 without applying any deductible or by applying a reduced deductible. As a result, an individual covered by a high deductible health plan will not be disqualified from being eligible to make tax-deferred contributions to a health savings account (“HSA”). The IRS acted quickly on this matter “…[d]ue to the nature of this public health emergency, and to avoid administrative delays or financial disincentives…” that could impede testing and treatment.
The general rule is that taxpayers must meet two requirements to be eligible to make and receive HSA contributions. They must be covered by a high deductible health plan and they may have no coverage that pays pre-deductible expenses. Further, high deductible health plans are precluded from covering non-preventative health care expenses before the minimum deductibles are met. The minimum deductible for individual policies is $1,400 and $2,800 for family coverage. As a result of Notice 2020-15, those covered under a high deductible plan may now see first dollar coverage for testing and treatment of COVID-19 and still keep their health savings account eligibility. From a plan administration standpoint, employers with self-funded plans that want to provide such first dollar coverage likely will need to consider whether a plan amendment is required.
What’s Next?
As we continue to learn more about COVID-19 and the impact it will have on our communities, employers will begin to face practical questions regarding what expenses their employer-sponsored health plan will and will not cover and whether plan design changes are necessary to accomplish their goals. As we have seen with the quick issuance of Notice 2020-15, official guidance is subject to rapid change, and we will continue to monitor developments that may affect employers and employer-sponsored plans.
If you have any questions on issues discussed in or related to this post, please contact:
- Bill Roberts at (502) 568-9364 or ebplans@wp.hallrender.com;
- Calvin Chambers at (317) 977-1459 or cchambers@wp.hallrender.com; or
- Your regular Hall Render attorney.
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