IRS Guide Regarding COVID-19 Expenses

Compliance, Employee Benefits

On June 23, 2023, the Internal Revenue Service (IRS) issued updated guidance, Notice 2023-37, regarding COVID-19 expenses. This guidance modifies prior guidance regarding benefits relating to the testing and treatment for COVID-19 under a high deductible health plan (HDHP) for health savings account (HSA) eligibility purposes and provides clarification regarding items and services considered “preventive care”.

High deductible health plans compatible with HSAs are generally not permitted to provide benefits until the annual minimum deductible is satisfied. However, benefits that qualify as “preventive care” can be provided pre-deductible.

By definition “preventive care” would include services required by the Affordable Care Act as well as services determined by any guidance issued by the Department of the Treasury (Treasury Department) or IRS. During the COVID-19 pandemic, the Treasury Department and IRS issued Notice 2020-15 which allowed HDHPs to provide medical care services and items related to the testing and treatment of COVID-19 prior to the satisfaction of the minimum deductible without affecting HSA eligibility.

With the end of the COVID-19 National Emergency and Public Health Emergency in spring 2023, the Treasury Department and IRS have determined that the relief provided for these COVID-19 services in relation to HDHPs will end for plan years ending on or before December 31, 2024. After that date, plans will no longer be able to provide benefits for COVID-19 testing and treatment without applying the deductible.

Under current guidance, COVID-19 testing, and treatment benefits do not fall under the “preventive care” safe harbor for pre-deductible payment. However, if at a later date the United States Preventive Services Task Force (USPSTF) were to determine that COVID-19 testing is recommended with an “A” or “B” rating, then the services would be treated as “preventive care” and pre-deductible coverage would be allowed under a qualified high deductible health plan.

Key Takeaways:

Organizations that sponsor a HSA compatible high deductible health plan should review their coverage regarding COVID-19 testing and treatment and communicate to participants that those items will no longer be covered before the deductible is met for plan years starting in 2024.

The information provided is a summary of laws and regulations relating to employee benefit plan compliance. This information should not be construed as legal advice. In all cases, employers should consult with their own legal counsel.

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