First Dollar Coverage for Telehealth Under High Deductible Health Plans to End

11-22-2024

Ever since 2020, high deductible health plans (“HDHP”) have been able to cover telehealth on a first-dollar basis (i.e., without being subject to the deductible). This is coming to an end for plan years beginning on or after January 1, 2025.

Relief For HDHPs

Back in 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act first allowed HDHPs to cover telehealth and other remote care services on a first dollar basis through the end of 2021. This was initially designed to make medical care accessible during the COVID-19 pandemic, when it may not have been for many in need.

Congress first resurrected this relief in April 2022 after a three-month hiatus. This relief was scheduled to end on December 31, 2022 until congress extended it once again. This second extension is now coming to an end for plan years beginning on or after January 1, 2025.

Effect on HDHPs

HDHPs are limited in what the plan can cover on a first dollar basis before the statutory minimum deductible has been satisfied. With this relief soon coming to an end, HDHPs will no longer be able to provide first dollar coverage for telehealth. A plan that continues to provide first dollar coverage for telehealth is not a qualified HDHP and therefore is not HSA compatible.

To maintain HSA compatibility and continue to be a qualified HDHP, the plan must charge at least the Fair Market Value (“FMV”) for telehealth. The FMV can be a discounted rate, but the discounted rate must still reflect the FMV for the discounted rate. In other words, if the FMV was $100, and the discounted FMV was $70, $70 could be used as the FMV. An excessive discount for significant medical benefits (such as a $5 FMV in this example) may give the impression that the plan is providing first dollar coverage.

Next Steps

Employers currently providing first-dollar coverage under their health plans need to remove this for their plan years starting on or after January 1, 2025. Employers required to make this change should also consider communicating this change to plan participants who may have become accustomed to this first-dollar coverage. If telehealth is provided through an outside vendor (i.e., other than the insurance carrier or Third Party Administrator), employers should work with the vendor to ensure participants enrolled in the HDHP are being charged the FMV for telehealth, and amounts paid to the vendor are properly tracked.

NOTICE OF DISCLAIMER: BUA is not a law or accounting firm, and therefore cannot provide legal or tax advice. The information herein is provided for general information only and is not intended to constitute legal or tax advice as to an organization’s or individual's specific circumstances. It is based on BUA's understanding of the law as it exists on the date of this publication. Subsequent developments may result in this information becoming outdated or incorrect and BUA does not have an obligation to update this information. You should consult an attorney, accountant, or other legal or tax professional regarding the application of the general information provided here to your organization’s specific situation in light of your or your organization’s particular needs.