September 11, 2023

Background

In March 2020, Treasury/IRS published guidance (Notice 2020-15) providing that a health plan that otherwise satisfies the requirements to be high deductible health plan (HDHP) will not fail to be an HDHP merely because the plan provides medical care services and items purchased related to testing for and treatment of COVID-19 prior to the satisfaction of the applicable minimum deductible. Internal Revenue Code (IRC) Section 223 also provides a safe harbor (outlined in Notice 2004-23) permitting HDHPs to cover preventive care services prior to the satisfaction of the minimum annual deductible. Treasury/IRS guidance outlines permissible preventive care benefits for purposes of this safe harbor that HDHPs may provide without cost sharing to plan participants.

On March 29, 2023, the Departments of Labor/Employee Benefits Security Administration (DOL/EBSA), Health and Human Services (HHS), and Treasury (collectively the Departments) released FAQs About Families First Coronavirus Response Act, Coronavirus Aid, Relief, and Economic Security Act, and Health Insurance Portability Act Implementation Part 58 (FAQs Part 58) to assist group health plans and health insurance issuers prepare for the end of the emergency declarations. The Departments indicated in FAQs Part 58 (Question #8) that the relief provided by Notice 2020-15 would continue to apply until further guidance was issued. Business Group on Health has covered FAQs Part 58 in detail both in a prior newsletter article and in our April 2023 Regulatory & Compliance webinar.

On April 13, 2023, the Departments issued FAQs About Affordable Care Act and Coronavirus Aid, Relief, and Economic Security Act Implementation Part 59 (FAQs Part 59) providing initial guidance to plan sponsors and health insurance issuers on impact of the ongoing Braidwood Management Inc. v. Becerra litigation affecting the ACA’s requirement to cover preventive services without cost-sharing. FAQs Part 59 stated that, until further guidance is issued, plans subject to the ACA’s preventive services requirements must continue covering without cost sharing all items and services recommended with an “A” or “B” rating by the U.S. Preventive Services Task Force (USPSTF) on or after March 23, 2010. FAQs Part 59 (Question #7) confirmed a temporary allowance for HDHP plans to continue covering “A” and “B” rated services prior to the satisfaction of the minimum annual deductible.

Notice 2023-37

Published on June 23, 2023, Notice 2023-37 affirms that the IRS is of the opinion that, with the end of the COVID-19 NE and PHE, the relief provided in Notice 2020-15 is no longer needed. Notice 2023-376 modifies this prior guidance to specify that the relief for HDHPs to cover pre-deductible COVID-19 testing and treatment services will extend only until plan years ending on or before December 31, 2024.

Additionally, Notice 2023-37 clarifies that Treasury/IRS do not consider COVID-19 screening (i.e., testing) services to be “preventive care” under the IRC Section 223 safe harbor since Treasury/IRS are of the view that COVID-19 differs from the types of infectious diseases included in the preventive care safe harbor. Accordingly, the prior guidance is effective as of the date of publication of Notice 2023-37 (June 23, 2023).

Notice 2023-37 also notes, consistent with the Departments’ guidance in FAQs Part 59, any item or service recommended with an “A” or “B” rating by the USPSTF on or after March 23, 2010 will be treated as preventive care under HSA eligibility rules, regardless of whether they must be covered without cost sharing. Treasury/IRS further provide that if the USPSTF recommends COVID-19 testing with an “A” or “B” rating, then these services may be covered by HDHPs prior to the satisfaction of the minimum annual deductible.

Next Steps

Employer plan sponsors of HSA-qualifying HDHPs that currently cover pre-deductible COVID-19 testing and/or treatment services should review the guidance in Notice 2023-37 and coordinate with legal counsel, carriers/vendors, and third-party administrators (TPAs) to amend the terms of the plan to ensure this pre-deductible coverage no longer applies for plan years ending after December 31, 2024. Employer plan sponsors HDHPs with non-calendar year plans will want to take note of the timing considerations, as the current plan year that began/will begin sometime in 2023 will be the last plan year that ends prior to December 31, 2024 after which pre-deductible coverage will no longer be allowed.

Employer plan sponsors should generally also expect to communicate any such coverage changes to plan participants and beneficiaries via applicable notices such as summaries of benefits and coverage (SBCs), summaries of material modifications (SMMs), and/or summary plan descriptions (SPDs).

Business Group on Health covered IRS Notice 2023-37 during our July 2023 Regulatory & Compliance webinar. We have also provided coverage of other transition issues for plan sponsors relating to the end of the COVID-19 NE and PHE in a prior  Public Policy Alert, newsletter articles on FAQs Part 58 and FAQs Part 59, as well as other recent Regulatory & Compliance Update webinars from February 2023, March 2023, and April 2023. Business Group on Health will continue to keep members informed of regulatory developments.

Resources

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Policy & Advocacy Compliance COVID-19 Health Accounts