Offering Telemedicine Services While Maintaining Health Savings Account (HSA) Eligibility

November 27, 2018

Telemedicine services allowing individuals to have a “virtual” visit with a board-certified doctor have grown in popularity. Visits are conducted via phone or video and doctors can review electronic health records to diagnose, treat and prescribe some medications. Although medical services are provided virtually rather than in person, a telemedicine visit is a “real” physician visit, not just preventative care or a helpline. An increasing number of employers are offering telemedicine benefits to their employees, either as a stand-alone benefit (such as Teladoc®) or as an embedded benefit offered by their health insurance carrier.

Traditional healthcare plans do not exclude or prohibit the use of telemedicine services. There are no charges to the plan for medical services and reimbursement for prescriptions are the same as any other under the plan. However, employers who offer a high-deductible health plan (HDHP) and a health savings account (HSA) should be aware of a potential issue if they also implement a stand-alone telemedicine benefit, especially one with a zero or low copay. It is possible that having a stand-alone telemedicine benefit available will render an individual ineligible to make or receive an HSA contribution.

HSAs allow eligible employees to make pre-tax contributions to a bank account for the purpose of covering current or future out-of-pocket healthcare costs. To be eligible to contribute to an HSA, individuals must be enrolled in a qualified HDHP and cannot be covered under any other health plan that provides coverage for any benefit that is covered under the HDHP.

A stand-alone telemedicine plan might affect HSA eligibility because of IRC Section 223(c)(1), which provides that an individual in a HDHP is eligible to make an HSA contribution only for those months in which the individual is not covered under any other health plan which is not a HDHP, and which provides coverage for any benefit which is covered under the HDHP.

The stand-alone telemedicine benefit could be construed as undermining the rationale behind HDHPs and providing a non-allowable benefit, particularly if there is a zero or very low copayment (such as $5 or $10).  It is possible the IRS could issue future guidance saying that telehealth coverage is another health plan and that a low- or no-cost telehealth virtual visit is essentially providing a paid or subsidized benefit before the deductible is met, and that the $5 or zero co-pay is really paid for by the aggregate premiums paid by or for all telehealth enrollees.

On the other hand, it is also possible that Congress could pass legislation amending Code section 223 and explicitly state that telemedicine is a limited benefit or is “permitted insurance” for HSA eligibility.  Such legislation would likely require a “fair market value” copay, which is why many insurers who include telemedicine as part of their high-deductible group health plan also impose a $30 or $40 copay.

Since telemedicine provides services for many diseases and illnesses, it is not exclusively preventive care or screening and is not a fixed payment for hospitalization services. Therefore, it constitutes “other health coverage” and its use will prevent any further contributions to the HSA bank account. It is, then, disqualifying coverage if the employer pays a portion of the cost of a telemedicine consultation or the participant pays less than fair market value for access to the consultation, before meeting the HDHP deductible.

Employers offering a telemedicine benefit as part of a group health plan should:

  • State in the wrap document or wrap SPD that the telehealth benefit is part of the group health plan and include evidence of it in the health plan’s form 5500 filings.

Employers offering a stand-alone telemedicine plan should:

  • Clearly communicate to employees enrolled in an HDHP that use of the telemedicine benefit will prohibit contributions to the HSA.
  • Discontinue offering telemedicine services to those enrolling in the HDHP and who have or will have an HSA bank account, until the time that any new regulatory guidance is rendered.

When offering a telemedicine program, employers should:

  • Include the telemedicine program in any COBRA offer of coverage.
  • Offer telemedicine contributions as pre-tax elections if offering benefits through a cafeteria plan.
  • Prepare and file a Form 5500 for any telemedicine plan with 100 or more participants.