Does the HSA eligibility exception for first dollar telehealth coverage end in 2025?

Yes, unless it is further extended by Congress.

As background, for a participant to be eligible to make or receive tax-favored contributions to an HSA, the participant must be covered under an HDHP and have no impermissible health coverage. In the context of HSA eligibility, impermissible coverage refers to any non-HDHP health coverage that provides “first dollar coverage,” meaning before the statutory minimum HDHP deductible is met.

The Consolidated Appropriations Act, 2023 (CAA 2023) provided the latest two-year extension of relief that allows (but does not require) HDHPs to provide first dollar telehealth coverage without negatively impacting HSA eligibility. The relief was originally enacted through the CARES Act in March 2020 with the intention of increasing access to healthcare without an in-person contact risk of spreading COVID-19. The CAA 2023 relief expires for plan years beginning on January 1, 2025, and later. Note that for non-calendar year plans, the relief would continue for the remainder of the plan year that ends in 2025 (e.g., the relief would extend through June 30, 2025, for a plan year beginning July 1, 2024).

While there is bipartisan support for an extension of the telehealth relief, it may come through legislation passed very late in the year, such as in an end-of-year Congressional budget bill, or not at all. Opponents of the extension argue that the original pandemic-related inability to access in-person care has passed.

Unless the relief is extended again, plans currently providing first dollar telehealth coverage to HDHP participants will need to start charging for telehealth services in order to ensure HSA eligibility is not impacted. Changes to telehealth coverage should be clearly communicated to participants through enrollment materials and plan document amendments (e.g., through a Summary of Material Modifications or updated Summary Plan Description).

We will continue to report on any developments in Compliance Corner. For more information on HSA eligibility and impermissible coverage, download Health Savings Accounts: A Guide for Employers.