Employers’ high deductible health plans (HDHPs) can continue to cover COVID-19 testing and treatment without violating the eligibility rules for health savings accounts (HSAs)—but only through 2024—under new Internal Revenue Service (IRS) guidance.
That’s the bottom line of IRS Notice 2023-37, which also clarifies that certain preventive care services will remain part of the preventive care safe harbor for HSA eligibility. This is true even if the Fifth Circuit Court of Appeals ultimately rules that these services are not required to be covered without cost-sharing under the Affordable Care Act (ACA), affirming a recent federal court ruling.
- IRS relief for COVID-19 testing and treatment under HDHPs expires January 1, 2025, for calendar year plans.
- The IRS clarified that the preventive care safe harbor for HDHPs will not cover COVID-19 testing or treatment.
- Certain preventive care will remain part of the safe harbor for HSA eligibility, regardless of whether the Fifth Circuit Court of Appeals rules that such services are not required to be covered under the ACA’s cost-sharing provisions.
Notice 2023-37, issued June 23, 2023, covers three separate but related issues.
First, HDHPs can continue to cover COVID-19 testing and treatment under a special exception to the rule that medical benefits provided before the deductible would make participants ineligible to receive HSA contributions. In 2020, the IRS created this exception and did not limit it to the declared end of the federal COVID-19 national emergency (i.e., April 10, 2023). In its most recent notice, the IRS clarifies that such relief will end in 2024, with plan years ending on or before December 31, 2024, being the last for which the relief will apply.
Second, Notice 2023-37 clarifies an important point about preventive care. Under the tax rules governing HSAs, HDHPs may cover certain preventive care below the deductible level. The notice clarifies that this safe harbor for preventive care will not cover COVID-19 testing or treatment. Employers will feel the impact of this starting in 2025.
Finally, the notice provides another clarification about preventive care. Prior IRS guidance had indicated the preventive care safe harbor would include services that plans were required to cover without cost-sharing under the ACA. Plans continue to cover those services without cost-sharing pending the appeal of the recent ruling that services recommended with “A” or “B” ratings by the U.S. Preventive Services Task Force are not subject to the ACA requirement. Notice 2023-37 clarifies that HDHPs can continue to cover those services, even though they may ultimately not be part of the ACA requirement.
Ogletree Deakins’ Employee Benefits and Executive Compensation Practice Group will continue to monitor developments and will publish updates on the COVID-19/Coronavirus and Employee Benefits and Executive Compensation blogs and in the firm’s Coronavirus (COVID-19) Resource Center as additional information becomes available.