As part of the federal government’s rapidly evolving response to the impact of the 2019 Novel Coronavirus (COVID-19), the IRS has announced that individuals covered under a high deductible health plan (HDHP) will not lose their eligibility to make or receive pre-tax contributions to a health savings account (HSA) merely because their health plan provides benefits associated with testing for and treatment of COVID-19 before the HDHP’s ordinary minimum deductibles are met. In other words, if a sponsor of a health plan so chooses (and modifies its plan accordingly), the plan may generally cover COVID-19-related health benefits before an individual or family incurs the amount of out-of-pocket health costs that would normally be required before a plan could pay these benefits. Other requirements for a health plan to qualify as an HDHP, and a covered individual’s resulting eligibility to participate in a tax-favored HSA, remain the same.

HDHP Health Insurance Deductibles

As a reminder, a deductible in health insurance is the amount that an individual must pay for many of a plan’s covered health care services before that plan starts to pay. For example, if you are enrolled in an HDHP that has a $2,500 deductible, you must generally pay the first $2,500 of that plan’s covered services yourself before the plan provides its covered health benefits. In 2020, the minimum deductibles set by the IRS for a health plan to qualify as an HDHP is $1,400 for individuals and $2,800 for families. In reality, though, many HDHPs set deductibles that are significantly higher than these minimum amounts required by the IRS for eligibility to participate in a tax-favored HSA.

IRS COVID-19 Testing and Treatment Guidance

In its recent COVID-19 guidance, Notice 2020-15, the IRS announced that “all medical care services received and items purchased associated with testing for and treatment of COVID-19” that are covered by a plan without a deductible, or with a deductible below the minimum annual deductible otherwise required by the Internal Revenue Code and the IRS, will be disregarded for purposes of determining whether a health plan qualifies as an HDHP.

As the IRS also points out in its recent guidance, under existing law, HDHPs may cover certain services to individuals before their deductibles are met, such as certain preventive services like checkups and vaccinations. However, with the IRS’s COVID-19 guidance being issued so recently, individuals enrolled in high deductible health plans would be well-advised to contact their plans to find out if their plan will cover COVID-19-related testing and treatment without the imposition of their ordinary deductibles.