Blog

Pre-Deductible Telehealth Exemption Ends for HDHPs with HSAs

Telehealth Exemption for HDHP Plans Expired

On December 31, 2024, the telehealth services safe harbor, also known as the telehealth coverage exemption, which allowed High Deductible Health Plans (HDHPs) with Health Savings Accounts (HSAs) to cover telehealth benefits on a pre-deductible basis, expired. For HDHPs with plan years beginning on or after January 1, 2025, this telehealth exemption no longer applies. However, sponsors of HDHPs with HSAs that have plan years starting before January 1, 2025, are able to cover telehealth services before the deductible for the rest of that plan year.

Understanding the Telehealth Exemption

The telehealth exemption was introduced as part of the CARES Act during the COVID-19 pandemic. It allowed HDHPs to cover telehealth services without requiring participants to meet their health insurance plan deductible first. This provision was designed to encourage the use of telehealth plans and reduce in-person visits, providing a valuable benefit during a time of heightened health concerns.

Telehealth Exemption Impact on Health Savings Plans

With the expiration of the telehealth exemption, HDHPs can no longer offer first-dollar coverage for telehealth services. This means that participants now need to meet their deductible before telehealth benefits are covered. For those with an HSA, this change impacts their ability to make or receive HSA contributions if their HDHP does not conform to the standard rules.

Why This Matters

The expiration of the telehealth exemption is significant because it affects the ability of participants to make HSA contributions. To be eligible for HSA contributions, participants must be covered under a qualifying HDHP that adheres to the standard rules. Without the exemption, any contributions made while ineligible would need to be included in the participant’s taxable income and could be subject to a 10% excise tax.

What Plan Sponsors Need to Do

Plan sponsors of HDHPs with HSAs need to ensure compliance with the new regulations. Here are the key steps:

  1. Review and Amend Plan Design: Work with your insurer or third-party administrator (TPA) to update the plan design, removing pre-deductible coverage for telehealth services.
  2. Communicate Changes to Participants: Clearly inform participants about the changes to their telehealth benefits and how it affects their HSA eligibility.
  3. Update Compliance Materials: Ensure that all plan documents, including Summary Plan Descriptions (SPDs), reflect the updated plan design.

Partnering with Pierce Group Benefits

For those with an HDHP and HSA, understanding these changes and reviewing their plans is crucial. By staying informed and making necessary adjustments, plan sponsors can ensure compliance and help participants manage their healthcare expenses effectively. For more information, contact your dedicated Pierce Group Benefits Account Executive or reach out to a PGB Representative at partnership@piercegroupbenefits.com.