Is Telehealth Now Disqualifying for HSA Contributors? Not Necessarily!

Yes, federal pandemic emergency legislation has expired. But Health Savings Accounts owners who are funding their accounts can still enjoy the convenience and lower cost of virtual visits - some at no out-of-pocket cost.

Sometimes a sudden disruption in economic markets spurs new innovation or elevates nascent trends or technologies to the forefront. The latter was the case with virtual medicine and the pandemic, as the rapid spread of Covid-19 beginning in March 2020 closed patient access to many medical providers. Telemedicine, a small but growing trend prior to the pandemic, became the only way that most patients could receive care during the final eight months of 2020. And once patients began to experience this new form of service delivery, many were eager to maintain access to it for some or all new and ongoing care.

The Benefits of Telemedicine

Virtual visits offer two important benefits: convenience and cost.

The convenience of virtual visits brings treatment options to many Americans who otherwise might have to choose between other responsibilities (like work and family) to address medical needs. This is especially true of people who live in rural areas (no nearby providers) and lower-income workers (taking time off for medical visits typically means foregoing hourly pay).

Imagine you have mental-health issues (or a family member who relies on you for transportation does). And imagine you don't live within, say, 20 miles of an appropriate clinician. Prior to virtual care, you'd need to take time off from work (perhaps completing paperwork under the Family Medical Leave Act of 1990 to take intermittent leave and retain your job) at a possible loss of income. You'd spend perhaps two to four hours on the visit itself and transportation (the range depends on whether you're transporting yourself directly to the visit or leaving work to pick up the patient to attend the visit, then reversing the process).

Try doing that once (or perhaps twice) a week and maintaining a work-life balance.

In contrast, with telemedicine, you (or the family member) can go to a quiet place, sit in front of a smartphone or computer, and spend 50 minutes on a virtual visit, where the clinician can see your facial expressions and body movement, hear your tone, and listen to your words. That's the benefit of virtual care when employed properly.

The cost of delivering virtual care is much lower than in-person visits. The provider doesn't maintain an office, staff, or on-site equipment and facilities. She could be talking to a patient from her spare bedroom or a cubicle in a warehouse-like facility, rather than a high-rent office with a waiting room, exam rooms, and staff areas. Technology replaces staff for scheduling and billing. Telemedicine effectively eliminates most of the costs that are ancillary to the quality of the actual care. In a competitive market, that lower cost structure allows efficient companies to reduce the price of care.

Telemedicine and HSA-Qualified Plans

All services except select preventive care must be applied to the deductible on an HSA-qualified medical plan. Telemedicine visits are diagnostic (except in the rare case that a routine physical might be delivered virtually) and thus must be applied to the deductible.

When the pandemic closed physical medical offices, Congress responded by including a special provision for virtual medicine in the CARES Act, which it passed early in the pandemic. This bill permitted HSA-qualified plans to cover telemedicine below the deductible at no cost to the patient. The result: no patient financial barrier to receiving virtual care. In most cases, insurers didn't have to absorb the full price of virtual visits, but most did.

Full coverage for telemedicine remained in effect for all plans that renewed in 2020 and 2021. But it expired for plans that renewed Jan. 1, 2022, or later. Thus, while a number of patients can still receive virtual care at no out-of-pocket costs (their plan have not renewed in 2022), those whose coverage went into effect this year can't access telemedicine services at no cost to them if they haven't satisfied their deductible.

Now What?

Telemedicine is here to stay. Patients appreciate the convenience and benefit from access. Virtual-medicine companies have enhanced their technology to treat a growing range of conditions through this delivery system. And outcomes improve because variables that affect the delivery of care - like physical location of the provider, the patient's work status, and the patient's competing life priorities - aren't factors in access to care.

Telemedicine companies continue to align with insurers. A growing number of primary-care doctors - still a small number, but growing - are repositioning their practices to charge a monthly fee and delivering care in-person, through video interface with patients, and via text, e-mail, and chat. Delivery systems like Mass General Brigham, the medical behemoth in Massachusetts, are organizing a portion of their providers to offer virtual services to their patients. In short, telemedicine continues to grow or evolve, as it did before the pandemic. Covid-19 simply accelerated the trend and temporarily created a new high-water mark. The water will ebb, but medicine will never return exclusively to the model of Dr. Marcus Welby.

Back to HSA-Qualified Plans

So, what happens now that the provision in federal law expired? Is telemedicine permitted on HSA-qualified plans?

Yes. It always has been, even before technology made virtual visits a reality.

The difference is that now the service must now be applied to the deductible, just as it was prior to the temporary CARES Act provisions. Instead of a visit with no out-of-pocket costs, patient must now pay the full price for the visit. That price may be $49 (my bill for a virtual visit four years ago) or $209 (my primary-care physician's contracted price the last time I made an in-person visit to the office, more than two years ago), $284 (my spinal surgeon's price for a post-surgery follow-up visit), or some other price.

When the service is integrated into the medical plan - many insurers contracted with a leading telemedicine provider prior to the pandemic - this integration with the deductible is already in place. If an employer contracts with an outside telemedicine company to provide this service, the price that it charges must reflect a reasonable market rate.

What's a reasonable market rate? The term isn't defined in federal tax law, nor is there a safe harbor (a price above which a patient needn't worry about her eligibility to fund a Health Savings Account). A price of $25 doesn't seem reasonable. A $50 price tag would be easier to justify. A price of $100 probably wouldn't raise eyebrows.

When the telemedicine benefit is integrated with the medical plan, all charges are applied to the deductible. If the virtual provider isn't part of the insurance, the price that the patient pays probably is not applied to the deductible. In that case, patients need to ask the insurer whether they can submit a claim to have the price that they pay applied to the deductible (and, if so, whether it's the in-network or out-of-network deductible if applicable).

The Bottom Line

Your insurer should have adjusted its schedule of benefits and its claims system to charge a price for virtual care and apply that price to the deductible on all plans that renew Jan. 1, 2022, or later. Be sure to check with your insurer so that you don't lose your eligibility to open and fund a Health Savings Account because the insurer didn't update your coverage.

Could Congress change the law to revert to the CARES Act standard? Yes. But we're now a month into 2022, and Jan. 1 is the most common renewal date for commercial coverage. Some members of Congress hope to attach a retroactive provision to a health, tax, or budget bill to allow insurers and employers to continue to offer virtual care with no patient cost-sharing. Such a retroactive provision would be welcome to many. However, it's not the law now, and prospects for this - or any legislative initiatives - aren't great in the current political climate.

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