On June 23, 2023, the IRS issued Notice 2023-37 (the "2023 Notice") regarding COVID-19-related coverage for HSA-compatible high-deductible health plans ("HDHPs") and preventive care for HDHP purposes.
The 2023 Notice states that, with the end of the COVID-19 Public Health Emergency and National Emergency, the relief in the 2020 Notice is no longer needed. Thus, the HDHPs are only permitted to cover COVID-19 testing and treatment on a pre-deductible basis for plan years that end on or before December 31, 2024.
This means that calendar year HDHPs must subject COVID-19 testing and treatment to the deductible beginning with the 2025 plan year. This gives HDHPs more than a year to transition to applying the deductible to these services. However, non-calendar year HDHPs will have less time since the relief will only apply until the end of the 2023 plan year. This is because a 2024 non-calendar year plan year will end after December 31, 2024.
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IRS Notice 2023-37
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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.
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The Notice provides that HDHPs that are compatible with HSAs may continue to provide coverage for COVID-19 testing and treatment before the deductible is met only for plan years ending on or before December 31, 2024. After that, COVID-19 testing may be covered before the deductible is met only if and to the extent recommended as preventive care, including with an "A" or "B" rating by the United States Preventive Services Task Force ("USPSTF").
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In the Notice, the IRS observed that screening for common and episodic illnesses (such as the flu) are not included in the aforementioned list of infectious diseases. Thus, in the IRS' view, COVID-19 differs from the types of infectious diseases included in the preventive care safe harbor. As a result, effective as of June 23, 2023, the preventive care safe harbor does not include screening (i.e., testing) for COVID-19.
IRS Clarifies HDHP Coverage of COVID-19 Testing, Treatment Before Deductible
Holland | Jul 2023
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