HDHPs Can Continue Covering Telehealth with No Cost-Sharing under New Law

An expired provision that authorized high-deductible health plans to reimburse for telehealth and other remote health care services before the deductible has been met, has been revived.

The provision was extended from April 1 through Dec. 31 after President Biden signed the Consolidated Appropriations Act of 2022.

Due to the COVID-19 pandemic and ensuing emergency legislation, HDHPs had been required to cover telehealth services with no out-of-pocket costs for the health plan enrollee, but those rules expired at the end of 2021.

The extension was included in the budget bill as telemedicine has grown in popularity because it’s convenient particularly for people who have to travel far to their appointments. It also expands provider choice and access, proponents say.

HDHPs are usually only required to cover preventative care and 10 essential services mandated by the Affordable Care Act with no out-of-pocket costs for the policyholder. All other medical care must be paid for by the enrollees until they meet their deductible.

If a health plan were to violate this rule, it would result in the enrollee being barred from contributing to their attached health savings account (HSA).

The HDHP exemption was initially codified by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), a sweeping relief package to keep the economy afloat at the start of the pandemic.

The technical language of the act stated that HDHPs remain qualified for the purposes of HSA contributions if they cover telehealth or remote medical services before the enrollee has met their deductible. The exemption expired on Dec. 31, 2021.

That means there is a gap of three months through March 31 when coverage for telehealth before meeting their deductible would result in an HDHP enrollee being ineligible from contributing to their HSA.

This could result in confusion among enrollees, so employers need to be prepared for this.

What employers should do

As a result of this change, you should review your plan documents and summary plan descriptions to see if they have been updated to reflect this new HDHP exemption starting April 1.  If not, contact your insurer to get updated documents.

You should also inform your staff about the changes via usual company communications, memos and as an agenda item at your next company meeting.

How to Coax Your Employees to Enroll in an HDHP

Employers looking for ways to decrease their group health insurance outlays over the past decade have been turning to high-deductible health plans as they offer lower up-front premiums.

In 2021, 51% of the U.S. workforce was enrolled in one of these plans, according to a recent survey by ValuePenguine.com.

But successfully coaxing your employees to choose an HDHP is not always easy. It means getting the deductible amounts right and educating them on how to best use these plans.

Also, while the plans are not for everyone, they can be a good fit for those who do not use their health plans much, are young and in good health. These employees may instead be overpaying for their premiums if they are not in an HDHP with an attached health savings account (HSA).

The key to encouraging your staff to adopt these plans is to first understand why some are reticent about them, how you can overcome their objections and how you can better tailor the plans for them. The following are the main reasons HDHP adoption may be lagging among covered workers.

Lack of education

One of the biggest hurdles to overcome is that many people are shocked to see the amount of the deductible, even as they save money on their premium. And on top of that sky-high deductible, they still have copays.

If you want employees that would be better suited for an HDHP to actually sign up for a plan, you need to take the extra time to:

  • Explain how HDHPs work and that there is a trade-off for high deductibles in exchange for lower up-front premiums.
  • Provide custom, side-by-side medical plan comparison tables and different medical usage scenarios to illustrate which types of individuals are best suited for an HDHP and which ones are not. (This would include scenarios of individuals who may be high health care users who may not be well suited for an HDHP.)
  • Explain how they can funnel what they save in premiums into an HSA so they can save their money for future medical expenses (more on HSAs later).

After covering all of the above, you should encourage your staff to pencil out the math to figure out which plan is right for themselves and their families. They can do this with the usage scenarios you provide. They may need assistance in doing this and you can encourage them to ask questions so they can make the best decision.

Too-high deductibles

While employees expect an HDHP to have a higher-deductible than a traditional plan, they can be shocked by a multi-thousand-dollar deductible. And many employers offer plans that are at the maximum end of the deductible spectrum.

For 2022, the maximum out-of-pocket deductible for an HSA-linked single HDHP is $7,050 and for a family plan the total deductible is $14,100. The minimum deductible for these plans is $1,400 for a single plan and $2,800 for a family plan.

You can work with us to model out multiple plan design scenarios that will help you save money on your group benefits bill while maximizing plan adoption. These models do a good job of explaining possible annual outlays and savings at different premium and deductible levels. 

You’re not contributing to their HSAs

Employers will often fund HSAs with a matching contribution up to a certain dollar amount, but that’s not required under law. As a result, many employers do not contribute to these accounts. But HSAs are critical to the success of HDHPs.

It’s often hard to impart the importance of an HSA and how it can benefit a worker years in the future. To generate interest, it’s a good idea for the employer to offer to contribute to the account if the employee sets up an account. Once an employer starts contributing, the likelihood of the employee starting to do so increases exponentially. 

When selling them on the benefits, explain that an HSA never expires. Your employees can keep them for life and let the funds grow in value through investments, and then put them to use when they are older or if they have health problems years later.

Additionally, they are funded with pre-tax earnings, and withdrawals are not taxed either.

Tell them this is essentially free money and that at some point this year or far in the future, they may need the money in the account to pay for medical services.

The takeaway

Helping your workforce understand how HDHPs (coupled with an HSA) can benefit them is the best way to encourage them to enroll.

You may not convince everyone that an HDHP is right for them, but if you get through to some of the ones who can benefit from an HDHP, they may share their experience with colleagues later.

2022 HSA Contribution Limits, HDHP Minimums, Maximums Set

The IRS has set the maximum amounts employees can funnel into their health savings accounts and health reimbursement accounts (HRAs) for the 2022 policy year.

The IRS updates these amounts every year to adjust for inflation in addition to minimum deductibles for high-deductible health plans, as well as the out-of-pocket maximums your employees are subject to. HSAs, which help employees save for medical expenses, are only available to employees enrolled in HDHPs. 

Here are the new figures for 2022:

HSA annual contribution limit

  • Individual plan: $3,650, up from $3,600 in 2021
  • Family plan: $7,300, up from $7,200 in 2021

HDHP minimum annual deductible

  • Individual plan: $1,400, the same as in 2021
  • Family plan: $2,800, the same as in 2021

HDHP annual out-of-pocket maximum

  • Individual plan: $7,050, up from $7,000 in 2021
  • Family plan: $14,100, up from $14,000 in 2021

Excepted benefit HRA

  • Maximum annual employer contribution: $1,800, the same as in 2021

Federal law requires health plan enrollees to use HSAs with HDHPs.

HSAs explained

An HSA is a special bank account for your employees’ eligible health care costs. They can put money into their HSA through pre-tax payroll deduction, deposits or transfers. As the amount grows over time, they can continue to save it or spend it on eligible expenses. 

Employers can also contribute to the accounts, but the annual contribution maximum applies to all contributions in total (from the employee and the employer). 

The money in the HSA belongs to the employee and is theirs to keep, even if they switch jobs. The funds roll over from year to year and can earn interest. Some plans also have investment options for the funds.

There are a number of benefits for employees who have HSAs:

  • The money an employee contributes to an HSA is not subject to income taxes.
  • If employees contribute through payroll deduction, the amount is taken from their pay before taxes are taken out, which reduces their overall taxable income.
  • They are not taxed on withdrawals, and HSAs even help reduce taxable income.
  • If employees contribute to their HSA with after-tax money, they can deduct their contributions during tax time on Form 1040.
  • Employees can tap the funds for any approved out-of-pocket medical expenses.

Here’s how they work:

  • Employees can make withdrawals with a debit card or check specific to the HSA.
  • Employees can use the money in their HSA to pay for care until they reach their deductible, out-of-pocket expenses like copays and coinsurance.
  • They can use the funds to pay for other eligible expenses not covered by their HDHP, like dental or vision care (eye exams and corrective lenses).

Put Money into an HSA instead of a 401(k) After Employer Matching: Report

One of the main recommendations for employees with 401(k) plans is that they should contribute at least enough to their plan every paycheck to ensure they receive the maximum they can in their employer’s matching contributions.

But a new study by Willis Towers Watson recommends that younger, healthier workers should divert savings to their health savings account from their 401(k) after capping out employer matching instead of continuing to put money into their retirement plan.

The report reasons that if they do this, they can get more bang for their buck when they use their HSAs to pay for future medical expenses.

That’s because HSAs can be kept for life and the money they’ve accumulated in them can be used to pay for medical expenses whenever they need them, including in retirement. And the moneys used in HSAs to pay for those expenses are not taxed when they are withdrawn, unlike 401(k)s, the funds of which are subject to federal income tax when withdrawn

The benefits of HSAs

With HSAs:

  • Pretax contributions, gains from investment, and withdrawals used for qualified medical expenses are exempt from federal and most state taxes.
  • Any unused balance is carried over to the next year.
  • Funds never expire.
  • Unused funds can be passed on to a beneficiary after death.
  • After turning 65, account holders can withdraw money for any purpose. However, if those funds are not use for a bona fide medical expense, they are taxed as income.

No other retirement savings vehicle has the same tax advantages as an HSA, so a dollar saved in an HSA can be worth significantly more than an unmatched dollar saved in a 401(k), according to Willis Towers Watson. Some employers will match a portion of workers’ HSA contributions or seed their accounts with money to encourage participation. 

That said, HSAs won’t outperform funds that are matched partly or fully by an employer, according to the report.

Willis Towers Watson said that those tax-free dollars and withdrawals can help pay for health care when we are likely to use it most: in retirement.

Men who retire at 65 with an average life expectancy of 85 would spend about $140,000 out of pocket for medical costs, and woman who retires at the same age and lives to 87 would spend an average of $159,000, according to the research.

The HSA pitch

HSAs can only be used in conjunction with a high-deductible health plan. When HSAs were first introduced, they did not have investment options for the money in the accounts, but as they have grown in popularity over the years, many HSAs now have evolved to essentially have the same investment choices as a 401(k).

HSAs have rules about how much of the balance can be invested. They will typically require that the first $1,000 in the account to be held in cash, and anything above that can be invested to help the funds grow over time.

In 2021, workers can contribute a maximum of $3,600 to their individual HSA account and $7,200 to a family coverage account.

If you are offering your workers high-deductible health plans with matching HSAs, and if you also provide a 401(k) and match part of the contributions, you may want to consider sharing this information with them to help them make informed choices on where to park their money for future use.

HDHPs Do Not Slow Down Health Care Spending: Study

A new study has found that high-deductible health plans have only a limited effect on the growth of health care spending for people who sign on for these plans.

The National Bureau of Economic Research researched HDHPs over a period of four years and found they failed to control health spending any more than traditional preferred provider organization plans (PPOs) and health maintenance organizations (HMOs). The only statistically significant impact on lower growth by HDHPs was on more expensive pharmaceuticals.

The news comes as HDHPs continue growing in use and popularity among employers and some of their workers. They are often paired with a health savings account that allows participants to set aside a portion of their wages before taxes in special accounts used to pay for health-related expenses, including deductibles.

When HDHPs first came on the scene they were touted as a potential cost-saver. The logic went that when the worker has more skin in the game and has to pay more for their medical care and medications, they will shop around for the lowest-cost service or drug.

Here are the main findings of the report:

  • Covered workers who switched from low-deductible plans to high-deductible plans saw lower growth rates of spending, but for no more than a year.
  • HDHPs seem to discourage the use of less cost-effective drugs. The report surmised that’s because people with these plans will be more motivated to shop around for better prices, like from an online pharmacy.

Considerations

PPOs continue to be the most popular choice among employees and HDHPs continue growing as employers look to cut their and their employees’ premium expenditures, according to a recent report by Benefitfocus, a benefits technology company. HDHPs currently account for about 30% of group health plans in play.

Also, some employees prefer having an HDHP as they can save money up front on the premium.

Over the past few years, employers have noticed that younger and healthier workers will gravitate towards HDHPs when offered them, as they will usually not need much health care and they are willing to trade a lower up-front premium for the small likelihood that they will need a significant amount of medical care, which they would have to pay for out of pocket.

However, workers in their 40s and older are more apt to stick to their PPO or HMO plans, which have higher premiums but lower out-of-pocket maximums.

But the authors of the National Bureau of Economic Research report said that for some people with health problems, HDHPs “may have high adverse health consequences when patients delay, reduce, or forgo care to curb costs, even when costs are moderate compared to health benefits.”

The takeaway

There is no doubt that HDHPs will continue growing in use, but they are not for everyone. Employers that give their workers an option of choosing an HDHP or a traditional PPO plan will be able to better cater to the different needs of their workers.

This is important as the U.S. workforce becomes more diversified, and for employers with multi-generational employee pools.

IRS Allows HDHPs to Pay for COVID-19 Testing, Treatment Pre-Deductible

The IRS has issued new emergency guidance that allows insurers to waive the cost of coronavirus testing and treatment for individuals who are enrolled in high-deductible health plans (HDHPs).

Major health insurers report they’ve been concerned that if they can make the change to their high-deductible plans without breaching IRS regulations regarding such plans. 

Specifically, the new guidance states that HDHPs will not lose their plan status if they provide medical care services and items related to coronavirus testing or treatment even before an enrollee has met their deductible.

While the regulation does not require HDHPs to cover the testing and treatment without any out-of-pocket expenses by the enrollee, the plans can do so ― and without breaching the rules regarding these plans.

The new rule could also pave the way for non-HDHPs like PPOs and HMOs to also provide coronavirus testing without out-of-pocket costs for their participants. While there is no rule preventing them from doing so now, many of the country’s large PPOs and HMOs have been reluctant to start offering free testing until they know how HSA plans would be affected.

Typically, enrollees in HDHPs with an attached HSA are required to pay all of their medicinal costs up to their deductible before the insurer will pay. The Trump administration earlier issued another rule that allows HDHPs to foot the bill for certain preventative health services, such as vaccines and screenings for specific conditions like diabetes and high blood pressure before the deductible is met.

In notice 2020-15, the IRS says that “Due to the unprecedented public health emergency posed by COVID-19, and the need to eliminate potential administrative and financial barriers to testing for and treatment of COVID-19, a health plan that otherwise satisfies the requirements to be an HDHP under section 223(c)(2)(A) will not fail to be an HDHP merely because the health plan provides medical care services and items purchased related to testing for and treatment of COVID-19 prior to the satisfaction of the applicable minimum deductible.”

The notice only applies to coronavirus and does not void any other requirements governing HDHPs and HSAs. It states that “Individuals participating in HDHPs or any other type of health plan should consult their particular health plan regarding the health benefits for testing and treatment of COVID-19 provided by the plan, including the potential application of any deductible or cost-sharing.”

IRS Eases Access to Chronic Disease Treatment

New guidance from the IRS will help people enrolled in high-deductible health plans get coverage for pharmaceuticals to treat a number of chronic conditions.

Under the guidance, medicinal coverage for patients with HDHPs that have certain chronic conditions – like asthma, heart disease, diabetes, hypertension and more – will be classified as preventative health services, which must be covered free with no cost-sharing under the Affordable Care Act.

The background

The guidance, which takes effect immediately, is the result of a June 24 executive order issued by President Trump directing the IRS to find ways to expand the use of health savings accounts and their attached HDHPs to pay for medical care that helps maintain health status for individuals with chronic conditions.

The executive order was in response to a number of reports that have shown that people with HDHPs will often skip getting the medications they need or take less than they should because they cannot afford to foot the full cost of the medication even before they meet their deductible.

This can lead to worse issues like heart attacks and strokes, which then require more and even costlier care, according to the guidance.

The latest move is a significant step that should greatly reduce the cost burden on individuals with chronic conditions, as many of the medications they need to treat their diseases can be extremely expensive.

The IRS, the Treasury Department and the Department of Health and Human Services have listed 13 services that can now be covered without a deductible, and have promised to review add or subtract services from the list on a periodic basis, according to the guidance.

Here is the full list of the treatments, and the conditions they are for:

Angiotensin-converting enzyme (ACE) inhibitors – Congestive heart failure, diabetes, and/or coronary artery disease.

Anti-resorptive therapy – Osteoporosis and/or osteopenia.

Beta-blockers – Congestive heart failure and/or coronary artery disease.

Blood pressure monitor – Hypertension.

Inhaled corticosteroids – Asthma.

Insulin- and other glucose-lowering agents – Diabetes.

Retinopathy screening – Diabetes.

Peak-flow meter – Asthma.

Glucometer – Diabetes.

Hemoglobin A1c testing – Diabetes.

International Normalized Ratio testing – Liver disease and/or bleeding disorders.

Low-density lipoprotein testing – Heart disease.

Selective serotonin reuptake inhibitors – Depression.

Statins – Heart disease and/or diabetes.

The items above were chosen because they are low-cost, proven methods for preventing chronic conditions from worsening or preventing the patient from developing secondary conditions that require further and more expensive treatment.

New Health Savings Account, HDHP limits for 2020

The IRS has announced new health savings account contribution maximums for the 2020 health insurance plan year.

Employees who have an HSA linked to a high-deductible health plan (HDHP) will be able to contribute to their HSA up to a certain level to help pay for health care and pharmaceutical expenses.

Funds going into your employees’ HSA accounts are deducted before taxes during each paycheck and the balance can be carried over from year to year.

Many HSAs also allow employees to invest the funds like they would with a 401(k). Because of this, HSAs have become a savings vehicle of sorts for people who are saving for health care expenses they are expecting in retirement.

HSAs can only be offered with an attached HDHP.

If you as an employer also contribute or partially match your employees’ contributions, they benefit even more, especially when compounding investment returns build up in the long term.

The IRS adjusts contribution limits for HSAs yearly based on inflation. For 2020, those limits will be:

  • $3,550 for individual coverage under an attached HDHP (up $50 from 2019).
  • $7,100 for family coverage (up $100 from 2019).

Also, remember that individuals who are 55 or older can make an additional $1,000 in catch-up contributions.

Besides the contribution maximum increasing, the deductible requirement for an attached HDHP will also climb for 2020:

  • For individual HDHPs, the deductible amount must be between $1,400 and $6,900. That’s compared with $1,350 and $6,750 in 2019.
  • For families, the range is $2,800 to $13,800. That’s up from $2,700 and $13,600 in 2019.

Long-term benefits

One of the best benefits from an HSA is the long-term advantage of being able to carry over balances year after year and let it build up for medical expenses in retirement. But, one of the key points that your employees should know is that if they use the funds in their HSAs for purposes other than qualified medical expenses, they have to pay a 20% penalty.

The website Investopedia recommends that your employees:

  • Max out their HSA contribution each year. If they do so, the amount they can save over the long term only grows through compounding.
  • Hold off on spending contributions now, and try to not use HSA funds for current medical expenses.
  • Make sure they only use the money for qualified medical expenses, so they don’t have to pay penalties of 20% plus regular income tax on their withdrawals.
  • Invest contributions for the long run. For example, if you’re currently invested in a mix of 80% stocks and 20% bonds, you should probably invest your HSA that way, too.
  • Use the account once they’re 65 or older. An added benefit to waiting until you’re at least 65 to spend your HSA balance is that the 20% penalty for withdrawing funds for purposes other than qualified medical expenses doesn’t apply. But, you will have to pay income tax if you don’t use the funds for qualified medical expenses.

HDHP Enrollees More Likely to Consider Costs and Quality

A new study has found that people enrolled in high-deductible health plans (HDHPs) actually are more likely to consider costs and quality when considering non-emergency care.

The 14th annual “Consumer Engagement in Health Care” study by the Employee Benefits Research Institute and market research firm Greenwald & Associates surveyed 2,100 adults, most of whom receive health coverage via their employers.

The survey found that people enrolled in health plans with a deductible of at least $1,350 for self only, and $2,700 for families, were more likely to take costs into account when making health care decisions.

Evidence of cost-conscious behavior:

  • 55% of HDHP enrollees said they checked whether their health plan would cover their care or medication prior to purchase, compared to 41% in traditional health plans.
  • 41% of HDHP enrollees said they checked the quality rating of a doctor or hospital before receiving care, compared to 33% of those in traditional plans.
  • 41% of HDHP enrollees asked for a generic drug instead of a brand name drug, compared to 32% of traditional plan enrollees.
  • 40% of HDHP enrollees talked to their doctor about prescription options and costs, compared to 29% of traditional plan participants.
  • 25% of HDHP enrollees used online cost-tracking tools provided by their health plans to manage their health expenses, compared to 14% of people in traditional plans.
  • HDHP enrollees also were more likely to take preventive measures to preserve health, including enrolling in wellness programs.

That said, the study did find some negative behavior among HDHP enrollees as well, including that 30% of HDHP enrollees said they had delayed health care in the past year because of costs, compared to 18% of traditional plan participants.

What you can do

In order to help HDHP enrollees get the most out of their plans, it’s recommended that their employers also offer health savings accounts.

This can help them pay for services that are not covered until they meet their deductible. Employers can help by matching (fully or in part) employees’ HSA contributions. This encourages them to participate.

Employers should also push preventative care. The Affordable Care Act requires all plans to cover a set of preventative care services outside of the plan deductible. Unfortunately, many people don’t know that these services must be covered by insurance with no out-of-pocket expenses for the enrollees.

Some employee benefits experts are recommending that employers tie the amount of premiums employees are required to contribute to how well they comply with preventative guidelines.

Non-enrollment in HSAs

These are the reasons employees cite for not enrolling in their company’s HSA:

  • Do not see any advantages: 57%
  • Do not have enough money to contribute to the account: 24%
  • Their employer doesn’t contribute to the account: 10%
  • Did not take the time to enroll: 8%
  • Do not understand what the HSA is for: 6%

The key to getting your staff to take advantage of the tax-savings feature of HSAs is education. You should make sure all of your eligible staff understand how they work.

And if you are not currently contributing some funds to their HSAs, now might be the time to consider doing that.

HDHPs Can Hamper Employee Health Without an Attached HSA

In recent years, employers and self-employed Americans have been migrating to high-deductible health plans (HDHPs) but, if they are not attached to a health savings account (HSA), they can end up costing the plan participant more than they can afford and create health problems for them down the road.

HDHPs typically have reduced premiums in exchange for the employee taking on a higher deductible for health care expenditures. The average person enrolled in an HDHP saves 42% in annual premiums, compared to those enrolled in preferred provider organization plans, according to research from BenefitFocus.

But in order to afford paying those deductibles, an attached HSA can help them sock away funds pre-tax to ease the burden.

That’s because HDHPs may leave families facing at least $2,700 in potential deductibles, and up to $13,500 in out-of-pocket medical expenses per year. In 2018, the average HDHP deductible was $4,133 per year for family coverage and $2,166 for single coverage.

For some people, this can pose a problem because:

  • 60% of Americans don’t have $1,000 in emergency savings.
  • 44% would have trouble meeting an unexpected $400 expense.

As a result, many HDHP beneficiaries find themselves putting off care, rationing their medications, or going without altogether. But this often leads to even greater expenses down the road, lost work, productivity losses – and even disability and death. Besides the toll it takes on the employee, their work for you can also suffer.

You can do your part to help your workers avoid this situation by providing an attached HSA, which can be crucial in helping them meet their medical bills.

How HSAs work

HSAs are one of the most tax-efficient savings vehicles in the tax code, and a potent tool for both insurance planning and retirement planning.

These tax-advantaged savings accounts are specifically designed to help people pay their health insurance deductible.

  • Contributions are tax-deductible. What’s more, if you offer the benefit via a Section 125 cafeteria plan, HSA contributions aren’t subject to Social Security and Medicare payroll taxes.
  • Balances accrue tax-deferred. And if participants don’t need to tap their HSA money for health care expenses, once they turn age 65, they can withdraw that money for any reason, penalty-free. All they pay is income tax.
  • Withdrawals to cover qualified medical expenses are tax-free.

What to do

Employers and plan sponsors should work to bridge the gap between deductibles and what employees can actually afford. Otherwise, the short-term saving is likely to be overwhelmed by absenteeism, presenteeism and future medical costs. You should:

  • Consider contributing to or matching employee contributions to health savings accounts.
  • Beef up flexible spending account benefits to help workers with current health issues, and to fund preventative care such as eye exams – which can help detect diabetes.
  • Offer critical illness insurance.
  • Implement or expand workplace wellness programs. A study from Health Affairs found that well-executed wellness programs generate a return of $3.27 per dollar invested.
  • Invest in worksite vaccination and screening programs.
  • Speak with your health insurance carrier or us about using wellness dollars designed to help employees reduce long-term medical costs.