How are HSAs, FSAs and HRAs affected by the CARES Act?

The Coronavirus Aid, Relief, and Economic Security (CARES) Act makes three important provisions for health savings accounts (HSAs), flexible spending accounts (FSAs) and health reimbursement arrangements (HRAs).

First, the act allows high-deductible health plans paired with HSAs to cover telehealth services before a patient has met the plan deductible. Normal cost-sharing can still be imposed for telehealth visits, such as through co-pays that the plan may require after the deductible is met. This provision is temporary and will sunset Dec. 31, 2021, unless Congress extends it or makes it permanent.

Plan documents and employer policies should be amended to reflect this temporary change, and employers should coordinate with insurance companies to ensure compliance. Additionally, plan participants should receive notification of the change.

Second, the law permanently reinstates over-the-counter medical products as eligible expenses for HSAs, certain HRAs and FSAs without a prescription. This rolls back rules from the Affordable Care Act which required a prescription for eligible medical expenses. Third, these accounts may now allow certain menstrual care products, such as tampons, pads, liners and cups, as eligible medical expenses. These are permanent changes and apply retroactively to purchases beginning Jan. 1, 2020.

Employees will also need to be notified of the new changes so they can start enjoying the expanded benefits. It may be helpful to remind them which expenses have been covered and what the newly eligible expenses are. Because these changes apply retroactively, explain to employees how receipts for newly eligible expenses that they may have kept since Jan. 1, 2020, can be submitted and reimbursed. 

On December 27, 2020, the Consolidated Appropriations Act, 2021 was signed into law expanding some provisions of the CARES Act. This relief package allows taxpayers to roll over unused amounts in their health and dependent care flexible spending arrangements from 2020 to 2021 and from 2021 to 2022. This provision also permits employers to allow employees to make a 2021 mid-year prospective change in contribution amounts.

Employers will need to adjust their policies and plan documents to account for these new changes. Coordinate with third-party administrators and provide them with the amended plan documents to ensure compliance with your plan.