Telehealth Relief Update: Impact on Plans for 2025 and Beyond

As we commented upon in our January 2023 guidance, the Consolidated Appropriations Act, 2023 (CAA 2023) introduced numerous provisions directly affecting employers, including some welcome relief for plans via a safe harbor for high deductible health plans (HDHPs) to avoid health savings account (HSA) contribution rules when offering telehealth services. In an effort to avoid the spread of COVID-19 during the height of the pandemic, much emphasis was placed on avoiding in-person doctor visits in an attempt to make it easier for people to stay at home and receive virtual consultations instead.

Under the CAA 2023, plan sponsors were granted the ability to offer telehealth plans at zero cost alongside a HDHP offering without impacting HSA eligibility. However, at the time we noted that the telehealth relief provision would expire on December 31, 2024, unless made permanent. Since no extension has been provided (and if action is not taken by Congress before the new year), this means that telehealth relief for plans will officially end with plan years beginning on or after January 1, 2025.

Absent further guidance to save the telehealth relief safe harbor, any telehealth plan offering more than just preventive care that is provided at no cost to participants after January 1, 2025, will result in an ineligibility to make or receive HSA contributions. There are rumblings that some last-minute developments will change this relief from sunsetting completely or that it will be revisited by Congress at a later date, but as of now nothing is certain in that regard so plans should act accordingly. In the absence of a permanent solution, we may also see something temporary yet again to “save” this provision.

Generally, a telehealth services plan is considered disqualifying coverage that would cause a loss of HSA eligibility if offered without a deductible or a Fair Market Value (FMV) charge being issued each time the service is utilized by a plan participant prior to their minimum deductible being met for a qualifying HDHP. Individuals making contributions to an HSA must (a) be enrolled in a qualifying HDHP, (b) cannot have any other medical coverage that would disqualify them from contributing, and (c) cannot be claimed as a tax dependent by someone else. Outside of the safe harbor that spawned from the pandemic, telehealth is otherwise considered disqualifying if the coverage extends beyond preventive services.

Action is Required to Preserve/Protect 2025 HSAs

While we wait to see if Congress will do anything to extend the current relief in a timely manner, employers should be making all of the necessary preparations to comply in 2025 as if this will indeed sunset in an effort to best protect employees’ HSA eligibility. Our recommendation would be (a) to either do away with the telehealth component for HDHP enrollees or (b) set a FMV cost to use the service. If plans decide that they want to pivot at a later date based on Congressional guidance, a Summary of Material Modification (SMM) should prove to be an appropriate panacea in such an instance.