March 12, 2020

IRS Issues Additional Guidance Related to High Deductible Health Plans and Coronavirus

By Michael D'Addio, Principal, Tax & Business Services

IRS Issues Additional Guidance Related to High Deductible Health Plans and Coronavirus Tax & Business

The IRS has issued Notice 2020-15 as an initial response to the 2019 Novel Coronavirus (COVID-19). It provides that, until further guidance is issued, a high deductible health plan (HDHP) will not fail to be considered a HDHP if it provides health benefits for the testing and treatment of COVID-19 without the covered individual reaching his or her deductible. The health insurance plan will continue to be treated as an HDHP so that tax-favored contributions can be made by the insured to a Health Savings Account (HSA).

Under the code, only an eligible individual can deduct contributions to an HSA. In order to be an eligible individual, the individual must be covered by an HDHP and have no disqualifying health coverage. An HDHP satisfies certain requirements, including having minimum deductible and maximum out-of-pocket expenses.

The Trump Administration recognizes that one problem with containing the spread of COVID-19 is the cost of testing and treatment. The IRS Notice is intended to provide flexibility to HDHPs to pay for these costs without application of a deductible or cost sharing. The government is not mandating that these health plans cover these costs. The Service suggests that individuals contact their health plans to determine whether the costs of testing and treatment may be covered.

This relief is limited and does not apply to costs other than those related to testing for and treatment of COVID-19. Vaccinations continue to be considered preventive care for purposes of determining HDHP status.

For questions, do not hesitate to contact your Marcum tax professional.