Telemedicine—covering a broad range of health-related services delivered via phone or Internet—is being touted as the latest, greatest cost-saving regime. Employers are seeing its potential to reduce costs and provide greater healthcare convenience for employees.
But offering a telemedicine program appears to eliminate employees’ eligibility for a health savings account unless the telemedicine program falls into one or more of three safe harbors.
Telemedicine services can range from generic information about health conditions to diagnostic services, medical advice and prescriptions. Employees may be charged per use for these services, or they may pay a monthly or annual fee to receive a specified number of services or even unlimited services. Telemedicine may be offered as a discount to individuals who “join” or subscribe to the service.
Telemedicine can have risks if you offer an HSA. The rules for health savings account eligibility are complicated, and offering a telemedicine program could unintentionally render your employees ineligible to contribute to the account on a tax-advantaged basis.
Under the tax code, a health savings account allows participants to defer compensation on a pre-tax basis for the purpose of paying eligible medical expenses. HSA eligibility rules require that an individual be covered under a high-deductible health plan and not be covered under another health plan that does not have a high deductible.
The Internal Revenue Service has issued guidance outlining the types of benefits and programs that may be offered in a telemedicine program without jeopardizing eligibility for a health savings account. We have examined this guidance with respect to likely telemedicine arrangements.
Preventive Services: A telemedicine program generally will allow HSA participation if the program provides preventive care before the deductible is satisfied. So employer contributions, payments and reimbursements for preventive care would be permissible regardless of whether the deductible has been met. Preventive services in this context include periodic health evaluations, routine prenatal and well-child care, immunizations, tobacco cessation programs, obesity weight-loss programs and certain screening services.
While the IRS does not include treatment of an existing illness, injury or condition under these preventive care terms, it is interesting to note that drugs and medications may be considered preventive care when used to treat risk factors to prevent the recurrence of a disease or a disease that has not yet manifested itself.
Employee Assistance Programs: A telemedicine program that is not characterized as preventive may still allow participation in a health savings account if the program constitutes an employee assistance program that satisfies certain requirements. The IRS has indicated that an EAP is an “excepted benefit” and does not jeopardize HSA eligibility as long as the program does not provide “significant benefits” in the nature of medical care; coordinate benefits with any other group health plan; require employee contributions or premiums to participate; or require any cost sharing.
For purposes of determining whether employee assistance program benefits are “significant,” the IRS has indicated that the amount, scope and duration of covered services must be taken into account. For example, the IRS has stated that:
[A]n EAP that provides only limited, short-term outpatient counseling for substance use disorder services (without covering inpatient, residential, partial residential or intensive outpatient care) without requiring prior authorization or review for medical necessity does not provide significant benefits in the nature of medical care. At the same time, a program that provides disease management services (such as laboratory testing, counseling, and prescription drugs) for individuals with chronic conditions, such as diabetes, does provide significant benefits in the nature of medical care.
Discount Card Programs: Another way employers may be able to use a telemedicine program along with a health savings account is through a discount card program. An individual who is covered by a high-deductible health plan and also has a discount card for healthcare services or products at managed care market rates will still be eligible for a health savings account, even if the individual is required to pay the costs of the healthcare (taking into account the discount) until the deductible is satisfied. The IRS provides the following helpful example of a pharmacy discount card:
For a fixed annual fee (paid by the employer), each employee receives a card that entitles the holder to choose any participating pharmacy. During the one-year life of the card, the cardholder receives discounts of 15 percent to 50 percent off the usual and customary fees charged by the providers, with no dollar cap on the amount of discounts received during the year. The cardholder is responsible for paying the costs of any drugs (taking into account the discount) until the deductible of any other health plan covering the individual is satisfied. An employee who is otherwise eligible for an HSA will not become ineligible solely as a result of having this benefit.
You and your clients are exploring every avenue to make healthcare delivery efficient and affordable. Telemedicine and health savings accounts/high-deductible health plans are two of the tools in your toolbox. Be careful when using them together.