In order to facilitate the nation's response to the 2019 Novel Coronavirus (COVID-19), on March 11, 2020, the Treasury Department released guidance confirming high deductible health plans (HDHPs) may waive participant cost-sharing requirements for COVID-19 testing and treatment. See IRS Notice 2020-15.
The guidance is intended to eliminate potential administrative barriers to COVID-19 testing and treatment that HDHPs may have otherwise faced. Under federal tax rules, subject to certain limited exceptions, if an HDHP pays for benefits (e.g., by waiving participant cost sharing) before a participant satisfies the HDHP deductible, then that participant becomes ineligible to make or receive pre-tax health savings account (HSA) contributions.
However, under IRS Notice 2020-15, an HDHP is permitted to waive participant cost-sharing requirements for COVID-19 testing and treatment without interfering with a participant's ability to make or receive HSA contributions. This provides plan sponsors of self-insured HDHPs with additional flexibility when exploring plan design strategies to make COVID-19 testing and treatment available to plan participants.
Several state insurance departments have ordered insured health plans offered in those states to cover COVID-19 testing at no cost to participants. For employers sponsoring fully insured health plans in these states, the mandated COVID-19 services will be covered by the employer's plan without the employer needing to take additional action.
Employers who sponsor self-insured health plans, however, will need to coordinate any desired COVID-19 related cost-sharing changes with the plan's third party administrator (TPA). In response to the state mandates impacting their fully insured products, many TPAs have adopted procedures under which plan participants will not be charged for COVID-19 related testing, unless the plan sponsor instructs the TPA otherwise. Employers who sponsor self-insured health plans will be responsible for the full cost of any covered COVID-19 related services for which participant cost-sharing is waived. As a result, communication with the TPA will be essential to ensure any desired COVID-19 related cost-sharing changes are properly implemented and administered.
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