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IRS says employers can expand COVID-19 coverage with HSAs

03/17/2020

If you offer a high deductible health insurance plan compatible with a tax sheltered Health Savings Account, you know that the plan and the employees who use it face tight Internal Revenue Service restrictions on how much employees must pay before full insurance coverage kicks in.

Fortunately, the IRS has moved quickly to address COVID-19 cover-age through HSAs.

Health plans (commercial or self-insured) face losing the tax favored status of those HSA accounts if the plan pays benefits outside certain specific essential health benefits as defined under the Affordable Care Act. These include immunizations, a yearly physical, mammograms and colonoscopies—but not treatment for the common cold or seasonal influenzas. High deductible plans that cover these lose their tax preferred status.

The idea is that employees won’t seek out treatment for common colds and other seasonal ills unnecessarily if they have to pick up the tab.

Enter COVID-19, the illness caused by coronavirus. Many of its symptoms resemble those of the common cold. Controlling the pandemic requires early detection and treatment of COVID-19.

The IRS has now stated that high deductible HSA health plans can cover the cost of testing for and treatment of COVID-19 before plan deductibles have been met. Agreeing to do so won’t mean employers and employees cannot contribute to HSAs.

Note: The Families First Coronavirus Response Act may soon require all health plans to cover COVID-19 testing without copays.

Online resource Review the guidance at www.irs.gov/newsroom/irs-high-deductible-health-plans-can-cover-coronavirus-costs.