The effect of telemedicine on HSA eligibility continues to be somewhat ambiguous because the IRS has yet to release guidance on the subject. However, we believe there is enough IRS guidance to provide general considerations.
As background, an individual must be enrolled in a qualified HDHP and have no other impermissible coverage in order to establish and contribute to an HSA (including employer HSA contributions). Impermissible coverage is any coverage that pays benefits prior to meeting the statutory annual deductible ($1,300 for single/$2,600 for family coverage for 2017). This is also called “first-dollar coverage” and includes Medicare, Medicaid, TRICARE, general-purpose health FSA or HRA, a major medical plan with copays, or any non-HDHP that pays expenses before the statutory deductible has been satisfied. Alternatively, permissible coverage includes, among others, limited-purpose/post-deductible FSAs or HRAs, dental, vision, permitted insurance and other excepted benefits.
Telemedicine programs are typically just another way an employee can access medical care via phone/Internet. If the telephonic/virtual visits offered are only considered preventive care or insignificant benefits, then the plan would not cause someone to become ineligible for the HSA. However, these programs are normally not limited only to preventive services. Instead, participants can contact a licensed physician or health care provider to discuss various health conditions that go beyond preventive services, such as colds/flu, viruses, dermatological problems, infections, medications, etc. So, if the program provides diagnosis, treatment or prescriptions and the actual services are provided at no cost (or with a copay less than the service fee) prior to the statutory deductible being met, then the plan is providing significant benefits and would render an individual as ineligible to participate in an HSA (even if the employee is charged a premium for access to the physician). Therefore, it’s unlikely that such a program’s visits/consultations could be considered preventive care/insignificant benefits for purposes of HSA eligibility.
So, to summarize, if the telemedicine program provides a service that would be covered by the HDHP (e.g., a doctor's visit regardless if it is by Internet or phone), but the employee is not paying a copay or fee for service, then the telemedicine program is considered first-dollar coverage and is thus impermissible when it comes to HSA eligibility. Most of the telemedicine programs we see would fall into that “impermissible coverage” category because the employee is not responsible for any cost-sharing in connection with the virtual/telephonic visit.
One approach to avoid this problem would be to require the employee to pay a fee associated with the consultation. This way the virtual consultation would be similar to any other benefit offered under the qualifying HDHP (subject to the statutory deductible). Unfortunately, there is no exact threshold with regard to cost-sharing (e.g., charging a $40 fee/consultation). But the idea is that the doctor visit must have a cost associated with it so that the employee is not receiving first-dollar coverage, and that can be accomplished by assigning a fair market value to the visit. As an example, if a program charges $40 for a virtual visit, although the fee is lower than a regular in-person office visit would be under the HDHP, then the $40 could be considered the fair market value of the service provided. Therefore, the participant did not receive a benefit before meeting the statutory deductible. That would mean the individual is still eligible to contribute to an HSA.
Since the IRS has not provided official guidance, we couldn’t say for sure if charging a copay/fee is enough to render a telemedicine program permissible coverage. But a telemedicine program that provides first-dollar coverage (e.g., $0 cost for a visit) would clearly be considered impermissible coverage, and thus make an individual ineligible to continue HSA participation. Conversely, charging a consult fee/copay associated for a remote visit (fair market value of that service) and not receiving any first-dollar coverage may be a way to maintain HSA eligibility. Ultimately, it is up to the employer to understand the nature of its telemedicine program and its effect on their employees’ HSA eligibility.