Is telemedicine coverage a good or bad idea for clients with HSA eligible employees?

Apr 11 2016 | K.C. Barner, Assistant Vice President and Counsel, Benefits Compliance

Unfortunately, there is no clear answer, as compliance issues can make matters that initially appear simple become murky as lake water after a good storm.
Formally defined by the American Telemedicine Association, “telemedicine” is the use of medical information exchanged from one site to another via electronic communications to improve a patient’s clinical health status. Telemedicine is not new, but it is growing in popularity among employers and employees for a variety of reasons, such as, cost efficiency, technological advancements and convenience. Moreover, many states are not only encouraging the use of telemedicine, but mandating it. However, employers sponsoring high deductible health plans (HDHPs) should be diligent when adding telemedicine coverage to their plans so health savings account (HSA) eligibility is not adversely affected for participants.

As quick background, employers offering an HSA option may offer employees 1) permitted coverage 2) permitted insurance 3) preventive care 4) or other “insignificant” medical benefits without jeopardizing the employees’ HSA eligibility. Anything other than these four categories will likely be considered “impermissible coverage,” which is defined as coverage that would cover medical expenses below the statutory deductible of the qualifying HDHP. As a reminder, for 2016 the statutory minimum deductible is $1,300 for self-only coverage and $2,600 for any coverage other than self-only.

Out of these four categories, telemedicine does not fall into either the “permitted coverage” or “permitted insurance” definitions, so the question is whether it is considered to offer “preventive care” or “insignificant” medical benefits.

First, let’s take a look at “preventative care.” If the telemedicine coverage provided can be used for preventive services, then it will not interfere with HSA eligibility because preventive services can be provided prior to the statutory minimum deductible being met for a qualifying HDHP. That said, rarely is there a charge for preventive services anymore, unless the plan is grandfathered. Most major medical plans are not grandfathered and are covering all preventive services at zero-cost sharing anyway.

Next, it is important to consider the consequence of offering “significant” medical benefits. If the telemedicine coverage provided results in significant medical benefits—such as a diagnosis, treatment plan and even a prescription—at no charge prior to the statutory deductible being met, then there is a good chance that this will render the participants ineligible to make or receive HSA contributions. This could be problematic, since the services provided by the telemedicine coverage are likely the same services that are covered under the HDHP (physician consultations, diagnosis, treatment plans, etc.) before the statutory minimum deductible is met.

Finally, there is an alternative option available. The telemedicine coverage could be designed to provide preventive services prior to the statutory minimum deductible being met, but would have to charge the same deductible, copayment, etc. normally imposed under the HDHP for any “significant” medical services provided prior to that deductible being met. So, once the statutory minimum deductible was met, the telemedicine coverage would provide additional diagnostic treatment at no cost without jeopardizing the participant’s HSA eligibility.

To summarize, if the plan design presents the problem of significant medical benefits being provided by the telemedicine coverage at no charge prior to the statutory minimum deductible being met, then there is a good chance that this will render the participants ineligible to make or receive HSA contributions. In absence of direct guidance on this issue, from a compliance perspective, it is better to be more conservative meaning that the recommendation would be to err on the side of caution and consult with legal counsel prior to implementing such a plan design. Or, use the workaround design mentioned above so the telemedicine coverage would still impose the same deductible, copayment, etc. normally imposed under the HDHP, but only until the statutory minimum deductible was met.