The swift impact of the Coronavirus Disease 2019 (COVID-19) in New York and across the country has forced employers to evaluate the impact of the virus on their workforces. This information memo addresses some of the more important employee benefit plan issues for employers to consider in connection with COVID-19.
- Coverage for COVID-19 Testing. New York is one of a handful of states that have directed insurers to waive cost-sharing requirements with respect to COVID-19 testing. Pursuant to guidance from the New York Department of Financial Services, insurers are prohibited from (1) imposing cost-sharing on an in-network provider office or urgent care center visit when the purpose is to test for COVID-19, and (2) imposing cost-sharing on an emergency room visit when the purpose is to be tested for COVID-19.
Because self-insured health plans are governed by the Employee Retirement Income Security Act (ERISA) and are not subject to state insurance mandates, these requirements are not applicable to such plans. However, the U.S. House of Representatives has passed legislation that would require group health plans and health insurance issuers to impose similar restrictions on cost-sharing for COVID-19 testing. The legislation requires group health plans and health insurance issuers to waive cost-sharing requirements or prior authorization or other medical management requirements regarding approved COVID-19 tests and the administration of such tests in connection with health care provider office visits, urgent care center visits, and emergency room visits. The legislation is expected to be quickly taken up by the Senate this week.
One issue raised by a cost-sharing waiver is whether it poses problems for a plan that is considered a high deductible health plan (HDHP) under the Internal Revenue Code (Code) and is paired with a Health Savings Accounts (HSA). In general, in order for an individual to be eligible to make a contribution to an HSA, the individual may not be eligible for other coverage that would pay for health costs incurred prior to the individual satisfying the applicable HDHP deductible.
To address this issue, the IRS issued Notice 2020-15, which provides that, until further notice, a health plan that otherwise satisfies the requirements to be a HDHP will not fail to be an HDHP merely because the plan provides benefits associated with testing for and treatment of COVID-19 without a deductible, or with a deductible below the minimum deductible otherwise required by the Code. Accordingly, a group health plan participant enrolled in an HDHP may receive testing and treatment for COVID-19 and such coverage will not cause the participant to lose the ability to make contributions to an HSA.
Plan participants may inquire as to whether a hardship withdrawal is available under the plan to cover medical costs associated with treating COVID-19, as well as expenses and losses due to COVID-19 (e.g., loss of income due to a layoff or unpaid leave period). In general, under the hardship safe harbor rules, a distribution must be made on account of an immediate and heavy financial need, must be necessary to satisfy that need, and must fall within one of a number of permissible hardship events. Expenses to treat COVID-19 will satisfy these hardship distribution requirements, provided they are not reimbursable from another source (e.g., a group health plan).
While a hardship distribution is permissible to pay for expenses and losses (including loss of income) incurred by an employee on account of a federally declared disaster, the COVID-19 pandemic has been designated a national emergency and not a federal disaster. Accordingly, subject to further guidance from the government, plans utilizing the safe harbor hardship rules will be limited to distributions based on other enumerated hardship events, such as amounts necessary to prevent eviction and foreclosure, and qualifying medical, tuition, and funeral expenses.
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