House Committee Proposes a Permanent Telehealth Solution

A key committee approved a bill last week to codify favorable telehealth coverage. What does it mean?

Last week, the House Ways and Means Committee marked up and approved a bill that would permanently permit insurers and employers to cover telehealth (synonyms: telemedicine, virtual medicine) services below the deductible on HSA-qualified plans. This legislation would provide a final solution to an issue that Congress has addressed three times during the past three-plus years.

Early in the Covid-19 pandemic, Congress permitted insurers and employers (who are responsible for the design of self-insured plans that cover more than half of all employees and dependents) to cover telemedicine services below the deductible. Recall that during the first months of the pandemic, physician offices were closed out of an abundance of caution. Virtual care was the only available interaction between patients and providers for non-urgent or non-emergency conditions.

Twice since then, Congress has extended this policy at the 11th hour (or later) - the most recent effort's covering all visits through Dec. 31, 2024. Each time, it did so with some legislative flaws that temporarily disqualified some HSA-qualified plan enrollees from funding their Health Savings Accounts unless their insurers quickly changed plan designs for a few months.

Last week's action represents a permanent solution by permitting insurers and employers to cover telehealth in full (no patient cost-sharing) or in part (the insurer and patient share the cost of the service). The bill was approved by all Republicans and five Democrats on the committee, reflecting the bipartisan appeal of this approach.

The Historical Status of Telehealth Coverage

Coverage of telehealth services - whether incorporated into a medical plan or offered as a standalone medical benefit by employers - has always been problematic for Health Savings Account contributors. HSA-qualified plans must apply all covered services except select preventive care to the plan's deductible. If the contracted price for the visit is $49, for example, the patient is responsible for the full $49 before she has satisfied the deductible. Once the deductible is met, the plan can cover the service with no cost sharing or a different cost-sharing arrangement (for example, a $25 copay or 20% coinsurance).

If the telehealth benefit is provided outside the medical plan (which it typically was until a dozen or so years ago and still is in some cases today), that benefit is considered other medical coverage. To be eligible to fund a Health Savings Account, an owner can't have any disqualifying coverage. The telehealth benefit is disqualifying if it offers coverage before the patient has satisfied her deductible. But it's not disqualifying if the patient is charged a fair market rate for the service.

Example 1: Business Solutions, Inc., offers its employees a telehealth benefit that allows them to access care for a $10 copay. This plan is disqualifying because the patient's out-of-pocket price is below a fair market rate for this service.

Example 2: Fran Bakes Pancakes, LLC, offers workers a telehealth benefit that delivers the service for a price of $55. This plan probably is not disqualifying because $55 can be defended as a reasonable market price for the service.

During the last decade or so, insurers have incorporated telemedicine into their plan design, thus simplifying the process for applying the service to the deductible so that people covered on the plan (not just those who utilize the benefit) remain eligible to fund their Health Savings Account.

What's Not Argued

The congressional action doesn't address the question of whether telehealth should be covered under HSA-qualified plans (as similar discussions around Medicare debate whether that program should permit 68 million Americans to receive virtual care). Few people question the efficacy of telehealth when practiced properly. After all, telehealth offers several important benefits to patients:

Access. In clinical deserts like rural areas and inner cities, patients don't have convenient access to providers of primary or specialty care. Leveraging technology allows them to consult with a primary-care physician, specialist, or behavioral-health provider to whom they otherwise wouldn't have access.

Convenience. Even outside clinical deserts, patients who engage with providers through telehealth avoid travel and parking time and expenses, as well as waiting to be seen, allowing patients to make better use of that largely unproductive time - sometimes an hour or more - that's associated with a traditional office visit.

Compliance. Patients are more compliant when they have to make less of an effort to receive care. This is particularly true for patients who require regular care, such as behavioral-health counseling or monitoring of chronic conditions. Think of the patient who needs biweekly counseling. She can consult with her counselor via phone while at work (for example, in a private room or her car) and lose an hour's pay, rather than leave work for the day at 2:30 to drive half an hour to an appointment and then participate in the same visit.

The question addressed by Congress involves the financial arrangement for covering telehealth, specifically whether insurers and employers can be permitted to cover telehealth services below the deductible. The word permitted is important in this context. Current and proposed laws don't require telehealth to be covered below the deductible. These legislative efforts merely permit insurers and employers more latitude in plan design by allowing them to cover telehealth before a patient satisfies the deductible.

The Case for Permitting Below-the-Deductible Coverage

The case for permitting coverage below is straightforward. Waiving cost sharing for telehealth addresses one of the criticisms of HSA-qualified plans: All non-preventive physician visits are applied to the deductible. Other plans with high deductibles often cover office visits subject to a copay - typically $30 to $75, depending on the plan and whether the clinician provides primary or specialty care. Thus, HSA-qualified plans, which hold patients responsible for a contracted price of perhaps $100 to $300 for the same services, represent less attractive coverage. Permitting full coverage for telehealth can thus make HSA-qualified plans more attractive to current and potential enrollees.

Example: Kyle and Peter are both covered by their respective employers' plans with a $3,000 self-only deductible. Both consult with an orthopedic surgeon. The contracted rate in both cases is $225. Kyle pays a $50 copay and Peter pays the full $225 for the identical service.

It can be reasonably argued that encouraging patients to leverage the benefits (described above) of telemedicine may lower total medical spending and improve the quality of lives of patients with chronic conditions. If regular care for these conditions is inexpensive, then patients are more likely to comply. Their physicians can detect changes in their condition and address them promptly, thereby avoiding more intensive intervention when the patient's condition deteriorates.

Permitting full coverage for preventive care below the deductible would represent the first meaningful exception to the rules allowing any services except select preventive care to be covered below the deductible (although regulations have expanded and proposed legislation will expand the definition of permitted preventive care). It would be popular with patients and may perhaps lead to loosening the requirements of an HSA-qualified plan in other treatment areas.

There is a financial impact. If patients pay less out-of-pocket, then the parties who pay the claims (ultimately employers and employees collectively on group plans, or policy owners collectively in the nongroup market) pay more in the form of higher premiums. Insurers and employers can determine the optimal balance of patient cost sharing and premiums when deciding how to cover telehealth.

The Case against Permitting Below-the-Deductible Coverage

The case against allowing permanent flexibility rests on the notion that the federal government shouldn't be favoring one form of care over another. Telemedicine typically offers a price advantage over traditional brick-and-mortar visits because the underlying cost structure is less. Patients can balance the level of personal care, clinical relationships, and effectiveness of telehealth visits for specific conditions without full coverage.

A Compromise?

There is another way to address this issue. Rather than focus exclusively on telehealth, Congress can instead permit insurers and employers to exercise more flexibility in the design of their plans. A broad deductible is a rather blunt instrument that doesn't distinguish between high-value and low-value care or consider a particular patient's condition. It applies the same cost-sharing responsibility, regardless of the service or the patient.

Perhaps a better approach is to provide design flexibility that incorporates more (if not all) services, not just those delivered via telemedicine. Here are several ways to achieve this objective, from narrow to broad:

Expanded definition of chronic care. The House Ways and Means Committee took this approach, codifying Trump Administration guidance that lists 14 services for specific diagnoses that can be covered below the deductible. This approach recognizes that some services are high-value to vulnerable patients. But the list of services is small and the option of full coverage applies only to specific diagnoses.

Actuarial value. Plans in federal- and state-facilitated marketplaces are measured by actuarial value. In simple terms, the actuarial value of a plan is the average percentage of total claims paid by the plan (as opposed to the patient through out-of-pocket costs). If a plan has $10 million of total claims and it's responsible for paying $7 million, the actuarial value is 70 (or 70%). This approach would allow insurers and employers to adjust cost-sharing to reflect the value of services in general or for patients with specific diagnoses, as long as the percentage of claims dollars the plan paid didn't exceed a certain amount.

Decoupling. The broadest approach is to eliminate the requirement that an individual must be covered by an HSA-qualified plan to fund a Health Savings Account. Under this approach, anyone with approved coverage (perhaps any plan that meets federal standards under the Affordable Care Act) would be permitted to open and fund a Health Savings Account. This is the gold standard. The drawback is the cost to the Treasury in lost tax revenue.

The Bottom Line

Telemedicine is here to stay (though continued access in Medicare is dependent on action by Congress). It is another in an unending string of improvements to our lives that technology continues to deliver. It offers the hope of better diagnosis, better monitoring of chronic conditions, and a reduction in the cost (both dollars and well-being) of more intensive medical interventions that the absence of care can prompt. The only question is how telemedicine will be covered on an HSA-qualified plan.

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The content of this column is informational only. It is not intended, nor should the reader construe the content, as legal advice. Please consult your personal legal, tax, or financial counsel for information about how this information applies to you or your entity.