Do High-Deductible Health Plans (HDHP) cover coronavirus costs?
As a small business owner, the coronavirus pandemic has likely taken a lot out of you. Not only are guidelines changing almost daily, but the ways to get financial help can be challenging to wade through.
One of the latest changes is the announcement from the IRS that new high-deductible health plans (HDHP) can help ease the costs of the coronavirus.
But what exactly does an HDHP help cover when it comes to the coronavirus? Here’s what you need to know.
What is a high-deductible health plan?
Before we get into the nitty-gritty of what an HDHP covers as it relates to the coronavirus, let’s break down what this type of health care plan is.
An HDHP is ideal for employees who aren’t prone to getting sick. Why? Because while more of the healthcare costs come out of the employee’s pocket due to the high deductible, the monthly premium will be lower. Plus, if combined with a Health Savings Account (HSA), employees can pay for medical necessities without having to pay federal taxes on HSA contributions or distributions.
To qualify to make contributions to an HSA, the HDHP can’t provide benefits in any year until the deductible is met — with the exception of preventative care benefits since those do not have a deductible requirement.
What is HDHP coverage for coronavirus?
What is different about HDHPs in our current situation?
An HDHP can cover certain costs (like testing for coronavirus and treatment) before the deductible is reached without putting HDHP coverage status in jeopardy. This means that employees will be eligible to contribute towards their HSAs to cover their costs.
Plus, the expected coronavirus vaccine will be considered preventative care by the IRS and can be covered by an HDHP outside of the deductible.
What does this mean for employers?
This can mean a few things for small business employers. On March 18, President Trump signed the Families First Coronavirus Response Act (FFCRA). Under FFCRA, the healthcare plans offered by employers, no matter the size of the company, have to provide coverage for screening and testing for COVID-19 without any cost-sharing requirements. These requirements can be items like deductibles or co-pays. This law also takes away the element of prior authorization for:
- The amount it costs to test and detect coronavirus
- Healthcare visits (like emergency room visits, urgent care visits, and telehealth appointments) that lead to a test for the virus
If employees don’t have healthcare plans in place to cover these costs, federal funding is available that will provide reimbursement for testing and treatment.
In addition to the FFCRA, the Coronavirus Aid, Relief and Economic Security (CARES) Act, also has a part to play in how HDHP coverage affects coronavirus testing and treatment. The CARES Act was signed into law on March 27 and lets employees who have an HSA use HSA funds to buy over-the-counter medical supplies (like medicine or surgical masks) without a prescription. This is a permanent change and began on Jan. 1, 2020.
Lastly, the CARES Act lets employees use telehealth services before hitting the deductible. But regular cost-sharing like co-pays can still be in place for telehealth visits, even after the deductible is met.
This provision is a temporary one and will expire on Dec. 31, 2020, unless extended by Congress.
We know it’s an uncertain time right now. But H&R Block is here to help. Check out our tax resources for small businesses that will help guide you through this pandemic and schedule a 1-on-1 consultation with a small business expert to create a Recovery Action Plan for your business.