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Telemedicine and HSAs

Posted on June 7th, 2016

Telemedicine can generally be defined as a way to provide a broad range of health-related services by phone or through an online platform. Several employers and insurance carriers offer telemedicine services in conjunction with their health plan(s) as a way to provide a cheaper alternative of diagnosing and treating common illnesses, such as the cold or flu. 
Individuals that use telemedicine are typically charged a small copay for the service (some as low as a $0 copay). This has raised a question of whether the inclusion of telemedicine services with a health plan impact a person’s ability to make contributions to a Health Savings Account (HSA). Two key requirements for HSA-eligibility are that 1) a person must be covered by a qualified high deductible health plan (HDHP), and 2) the person must not be covered by another health plan that is not considered an HDHP. 
Health plans that offer copays prior to reaching the plan’s deductible will usually fail to meet the definition of a HDHP, and therefore eliminate HSA-eligibility. However, existing Internal Revenue Service (IRS) guidance does not specifically address whether or not telemedicine is considered a health plan, so the question remains if telemedicine might impact the ability for someone to contribute to an HSA. 
At least one IRS official has informally commented (for purposes of HSA-eligibility) that the definition of health plan not only includes other health insurance coverage, but it also include other plans, policies or arrangements that pay or reimburse medical expenses. From this, we can infer that at least some telemedicine arrangements would likely be considered health plans that eliminate HSA-eligibility.
Telemedicine arrangements that should preserve HSA-eligibility include:
  1. Those that count the employee cost (determined at market value) towards the HDHP deductible;
  2. Those that only provide coverage for preventive services;
  3. Those that only provide coverage for excepted benefits (e.g. dental/vision);
  4. Those considered discount programs (as defined in IRS Notice 2004-50, Q&A #9);
  5. Those considered employee assistance programs (as defined in IRS Notice 2004-50, Q&A #10);
  6. Those that provide separate coverage for “permitted insurance,” such as coverage for a specific disease or illness or a fixed amount per day for a hospitalization; or
  7. Any combination of the above.
It seems that most telemedicine arrangements provide coverage beyond the scope of the exceptions above, and as a result, it seems that most telemedicine arrangements would jeopardize HSA-eligibility. 
Unfortunately, without more specific guidance from the IRS, this is an area where some individuals and organizations may have a different interpretation. As telemedicine becomes more popular, we can only hope for more clarification.      
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The materials contained within this communication are provided for informational purposes only and do not constitute legal or tax advice.   

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