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Home > Coronavirus > A New Normal? Omnibus Bill Extends High Deductible Health Plan Telehealth Safe Harbor

A New Normal? Omnibus Bill Extends High Deductible Health Plan Telehealth Safe Harbor

By Katrina McCann & Jesse T. Foley on January 31, 2023

The Consolidated Appropriations Act of 2023 (“CAA 2023”), signed into law on December 29, introduced sweeping reforms to the employee benefits landscape. Not only do the CAA 2023’s “SECURE 2.0” provisions make some significant changes for retirement plans, but CAA 2023 also extends the telehealth plan safe harbor for high-deductible health plans (“HDHPs”) that were first introduced in the 2020 CARES Act. HDHPs can continue to offer first-dollar coverage for telehealth and other remote care services while preserving participants’ eligibility for health savings account (“HSA”) contributions. The two-year extension continues the relief until January 1, 2025.

Telehealth Services Safe Harbor 

The Internal Revenue Code provides that only individuals participating in an HDHP are eligible to make or receive contributions to an HSA. Generally, a participant must pay their HDHP’s deductible before the plan can cover medical services. If a plan covers a participant’s medical services before the deductible is paid, it is not an HDHP, and the participant is ineligible to make or receive contributions from an HSA. Any amounts contributed while a participant is ineligible must be included in the participant’s taxable income and are subject to an additional 10% excise tax.

The 2020 CARES Act temporarily allowed HDHPs to cover telehealth and other remote care services while preserving participants’ eligibility to make or receive HSA contributions even if the plan’s deductible has not been met. This safe harbor first expired at the start of 2022. It was reintroduced by the Consolidated Appropriations Act of 2022 in March of 2022 for the remainder of the year, and now CAA 2023 has extended the relief for plan years beginning January 1, 2023, through December 31, 2024.

Since CAA 2023 extends the relief for plan years starting in 2023, sponsors of non-calendar year plans that have part of their 2022 plan year in 2023 should be mindful of the gap in the protection for the portion of their 2022 plans that spillover into 2023, and may want to consult with counsel. Absent additional guidance, participants’ contributions to their HSAs during this period may be subject to the applicable income and excise taxes.

Other Changes to Health Plans in CAA 2023

CAA 2023 made several other significant changes to health plans, including:

  • Increase Medicare Provider Reimbursements. Beginning in 2023, Medicare anticipated cutting its provider reimbursement rates by about 4.5%. CAA 2023 reduced these cuts to 2% in 2023, with another 1.5% cut scheduled for 2024. The act also delayed the Statutory-Pay-As-You-Go Act of 2010 4% provider reimbursement cut until 2025.
  • Mental Health Parity Enforcement. CAA 2023 authorized the Centers for Medicare and Medicaid Services to award states up to $10 million in grants to enforce the Mental Health Parity and Addiction Equity Act’s nonquantitative treatment limitations.
  • Medicare Mental Health Parity Coverage Report. The Government Accountability Office was directed to report on Medicare’s coverage of mental health/substance use disorders compared to its medical and surgical services coverage.
Posted in Coronavirus, HDHP, Health Plan Compliance, HSA
Tags: coronavirus, HDHP, Health, High-Deductible Health Plan, HSA, Savings Account
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Photo of Katrina McCann Katrina McCann

Katrina E. McCann is a senior counsel in the Tax Department and a member of the Employee Benefits & Executive Compensation Group.

Katrina advises a diverse group of clients on a broad spectrum of employee benefits matters, including:

  • counseling clients with respect to
…

Katrina E. McCann is a senior counsel in the Tax Department and a member of the Employee Benefits & Executive Compensation Group.

Katrina advises a diverse group of clients on a broad spectrum of employee benefits matters, including:

  • counseling clients with respect to the design, drafting, implementation and ongoing qualification of their qualified plans in both the single and multi-employer context, including profit sharing, money purchase, 401(k), ESOP, and defined benefit plans;
  • providing counsel on the establishment, administration and continued legal compliance of health & welfare plans and programs;
  • advising tax-exempt organizations regarding their 403(b) plans and 457 arrangements;
  • creating and advising on non-qualified plans, including deferred compensation and supplemental employee retirement plans;
  • providing technical and practical advice on compliance with ERISA, the Internal Revenue Code, the Affordable Care Act, COBRA, HIPAA, and other laws affecting employee benefit plans, as well as issues concerning plan administration, qualification requirements, correction of plan document failures, fiduciary issues and prohibited transaction issues;
  • routinely working with clients and their service providers, advising on the RFP process, reviewing provider arrangements and collaborating to develop effective and compliant disclosures, government reporting forms and participant communications;
  • analyzing the employee benefits and executive compensation issues in connection with corporate transactions, advising on withdrawal liability matters and structuring benefit plans following a transaction and providing counsel with respect to all aspects of benefit plan mergers; and
  • advising both employers and senior executives in connection with various executive compensation matters, including the negotiation and drafting of equity plans and awards, employment agreements, severance agreements and other compensation arrangements.

Katrina is a member and former co-chair of Proskauer Women’s Alliance Steering Committee and serves on the Firm’s Reproductive Rights Steering Committee. She is also a Board member of Playwrights Horizons, an off-Broadway theater dedicated to the development of contemporary American playwrights and the production of innovative new work, and a Board member of the Axe-Houghton Foundation.

Prior to joining Proskauer, Katrina served as Special Assistant to the Mayor’s Office of Pension and Investments and was Special Assistant Corporation Counsel, Pensions Division, New York City Law Department. While in law school, Katrina was the Robert M. LaFollette/Keenan Peck Legal Fellow, serving in the offices of Senator Herb Kohl & the United States Senate Committee on the Judiciary.

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Photo of Jesse T. Foley Jesse T. Foley

Jesse T. Foley is a labor associate and a member of the Employee Benefits & Executive Compensation Group.

Jesse has a diverse practice advising multiemployer and single-employer clients on all aspects related to the legal compliance and tax qualification of ERISA-covered pension and…

Jesse T. Foley is a labor associate and a member of the Employee Benefits & Executive Compensation Group.

Jesse has a diverse practice advising multiemployer and single-employer clients on all aspects related to the legal compliance and tax qualification of ERISA-covered pension and welfare plans, including the treatment of such plans in corporate financings and transactions.

In his multiemployer practice, he represents a number of funds, counseling Boards of Trustees on issues such as healthcare compliance, cybersecurity, government investigations, benefit suspensions, special financial assistance, and withdrawal liability.

In addition, Jesse advises private, public, and not-for-profit employers on all aspects of their non-qualified executive compensation arrangements.  Jesse regularly provides technical and practical advice on the establishment, administration, and continued legal compliance of deferred compensation and supplemental employee retirement plans.  As part of his practice, Jesse routinely negotiates and drafts equity plans and awards, employment agreements, severance agreements, and other compensation arrangements.

Jesse earned his J.D. degree from the University of Southern California, where he was a Senior Editor of the Southern California Law Review.  Jesse also frequently contributes to Proskauer’s Employee Benefits & Executive Compensation Blog.

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