IRS Allows High Deductible Health Plans to Pay for COVID-19 Costs Without Deductible

Jeff Storch | 03.12.20

On March 11, 2020, the IRS released Notice 2020 – 15 allowing a high deductible health plan (HDHP) under Internal Revenue Code (Code) Section 223 to provide health benefits associated with testing for and treatment of the 2019 Novel Coronavirus (COVID-19) before satisfying the applicable minimum deductible.

An HDHP is a health plan that satisfies certain requirements, including requirements with respect to minimum deductibles and maximum out-of-pocket expenses. Section 223 of the Code permits an eligible individual to make tax-favored contributions to a health savings account (HSA). Among the requirements to be eligible is that the individual be covered under an HDHP and have no disqualifying health coverage. Without the IRS’s notice, certain COVID-19 treatments provided before satisfying the deductible might be treated as disqualifying health coverage and make the recipient ineligible to contribute to an HSA.

The IRS’s notice states that due to the unprecedented public health emergency posed by COVID-19 and the need to eliminate potential administrative and financial barriers to testing for and treatment of COVID-19, a health plan that otherwise satisfies the requirements to be an HDHP will not fail to be an HDHP merely because it provides medical care services and items related to testing for and treatment of COVID-19 prior to the satisfaction of the applicable minimum deductible. It continues that this provides flexibility to HDHPs to provide health benefits for testing and treatment of COVID-19 without application of a deductible or cost sharing. However, individuals participating in HDHPs or any other type of health plan should consult their particular health plan regarding the health benefits for testing and treatment of COVID-19 provided by the plan, including the potential application of any deductible or cost sharing. 

• Taxation