High-deductible plans may waive cost-sharing for coronavirus tests

March 11, 2020


The IRS released guidance on Wednesday that confirms employers may waive out-of-pocket costs for coronavirus testing and treatment for workers enrolled in high-deductible health plans.

Employers have been hesitant to eliminate cost-sharing for medical tests for COVID-19 for fear of running afoul of the law even as several states and dozens of private health insurers pledged affordable access to tests and treatment. The guidance is likely to allay employers’ chief concerns.

The IRS guidance states that high deductible health plans with health saving accounts will not lose their plan status if they provide medical care services and items related to the testing or treatment of the coronavirus prior to a plan member meeting the deductible. It provides employers and insurers with flexibility to cover those services without cost-sharing.

“This is a major win for patients. Under previous IRS rules, it was unclear whether coverage of the tests was allowed in an HDHP, and abundantly clear that treatment for the condition could not be covered until a patient had paid their entire deductible,” James Gelfand, senior vice president for health policy at The ERISA Industry Committee, said in a statement. “This new guidance will enable employers to offer better coverage, help contain and defeat COVID, and provide superior care and affordability to our workers and their families.”
Business groups and benefit lawyers said self-funded employers, which provide coverage to almost 100 million Americans, have held back from promising free coronavirus testing for their workers without IRS input. They’ve focused their coronavirus response efforts on limiting travel and allowing employees to work from home.

Employers were concerned that making the medical tests available for free to workers in high deductible health plans linked to a health savings account would technically prevent the companies and employees from contributing to the HSA tax-free, said Katy Johnson, senior counsel of health policy at the American Benefits Council. Health savings accounts are tax-favored accounts used to pay for medical expenses.

According to the Kaiser Family Foundation, 23% of workers with job-based coverage are enrolled in a high deductible health plan with a health savings account. High deductible plans have a deductible of at least $1,400 for individual coverage and $2,800 for family coverage.
The American Benefits Council, whose members include more than 220 of the largest U.S. corporations, sent a letter to the IRS and Treasury Department on Tuesday asking the agencies to confirm that high deductible plans could cover the COVID-19 test, administration of the test and related office visit for free or at reduced cost before the deductible is met.

Confirmation would “support employers’ ability to provide COVID-19 screening without cost sharing, will address potential conflicts with new state laws and will remove a distracting issue so that employers can spend time and resources to address other workforce issues regarding the impact of COVID-19,” according to the letter.

Though employers did not need permission to eliminate cost-sharing for coronavirus tests for workers enrolled in other types of plans, such as PPOs or HMOs, Lauren Vela, senior director of the Pacific Business Group on Health, said many didn’t want to change up any of their health plans until they knew how HSA plans would be affected.

Typically, people enrolled in a high deductible health plan with a health savings account must pay all of their costs until they meet a deductible and coverage kicks in. Previous IRS guidance created an exception to that rule for certain preventive health services, such as vaccines and screenings for specific conditions, which the plans can pay for before the deductible is met.

The preventive services list includes some screening for infectious diseases, such as hepatitis or HIV, but doesn’t explicitly include screening for the novel coronavirus.

In an interview ahead of the release of the new guidance, Cassandra Labbees, a partner at law firm Epstein Becker and Green, explained that IRS guidance tends to be specific and designed for the times; it may have been stretch for an employer to assume the preventive services exception would extend to coronavirus screening without confirmation from the federal government. While employers want to waive cost-sharing for the tests, she said, concrete guidance would provide them with the security they need to move ahead.

Public health experts say testing for the coronavirus is critical to preventing its spread. More than 1,000 cases have been identified in the United States, according to a database created by Johns Hopkins University. The virus, which originated in Wuhan, China, has rapidly spread to 118 countries with global cases exceeding 121,000 in just a few months. The virus has led to nearly 4,400 deaths, according to the database.

As more tests become available, the potential cost may deter some people from seeking care. More than 27 million Americans do not have health insurance, and they may be more likely than insured people to skip the doctor’s office when sick to avoid medical bills. Millions more—including those in employer plans—are underinsured, meaning they have high deductibles and out-of-pocket expenses that make them more likely to struggle with bills and put off care.

It is unclear what the cost of testing and treatment would be for a patient with coronavirus. While experts say eliminating out-of-pocket costs for testing is a step in the right direction, patients could still receive medical bills for the doctor’s office visit or related treatment.