On Friday, March 27, 2020, Congress passed the CARES Act (H.R. 748) and the President signed it into law. The $2 trillion bill was designed to provide economic relief for American citizens and business due to the COVID-19 healthcare emergency that has greatly impacted the U.S. economy. In addition to the stimulus checks and unemployment benefits the bill provided, the legislation also expanded how workers can use their healthcare benefits accounts.
CARES Act Expands HDHP Coverage and Eligible Medical Expenses for FSAs, HSAs
Telemedicine Coverage Under an HDHP
The CARES Act approved payments for “telehealth and other remote care services” under a High Deductible Health Plan (HDHP). Typically, an HDHP is only allowed to pay benefits after the deductible has been met (with the exception of preventive services), allowing account owners to still qualify to make contributions to their HSAs. In response to the COVID-19 pandemic, the IRS has issued guidance that an HDHP can cover COVID-19 testing without cost-sharing and still maintain HSA eligibility.
The expiration date for this provision is set for December 31, 2021. However, there is support to continue some form of the telehealth model. For example, the Centers for Medicare and Medicaid Services is proposing an extension of telehealth services through December 31, 2023. This proposal has significant support, but the final outcome does remain to be seen.
OTC Medications and Menstrual Care Products
The CARES Act also expanded the list of qualified healthcare expenses for purchase with a Flexible Spending Account (FSA), Health Savings Account (HSA), and Health Reimbursement Arrangement (HRA). Over-the-counter (OTC) medications, including non-prescription pain relievers and cold/flu medications, may now be purchased without a prescription. Once classified as eligible healthcare expenses, most OTCs were disallowed beginning in 2011 under the Affordable Care Act (ACA). In addition, menstrual care products have been added to the list of qualified OTC healthcare expenses.
There is no expiration date on this provision.
It is important to note that HRA plans can vary by employer and may not include these items as eligible expenses, at the employer’s discretion. FSA and HSA participants may use their account funds to pay any qualified healthcare expense.
CARES Act summary assistance provided by the Society of Professional Benefits Administrators (SPBA) and the Employers Council for Flexible Compensation (ECFC).