How COVID-19 and the CARES Act may impact your healthcare benefits
Paying and saving for health care can be a daunting task under normal circumstances. Now, add the complexity of a pandemic and economic uncertainty, and most people may feel increasingly unprepared. In this piece, I outline how COVID-19 (coronavirus) may impact healthcare benefits and what employers need to know.
When there’s an unexpected disaster or pandemic like COVID-19, there is already plenty to worry about, so worrying about paying for unexpected medical expenses is not something anyone wants on that list.
Sometimes it takes an emergency situation, like COVID-19, to pass laws that can help alleviate the burden of medical expenses. At UMB, we work with organizations to advocate for legislation that can expand benefits during good times and bad.
I recently became a member of the Employers Council on Flexible Compensation’s (ECFC) board of directors. UMB has a long-standing history with the ECFC and I am honored to continue filling that role of being an advocate.
Healthcare savings options are extremely important. As board members, we are advocating for more choices when it comes to healthcare accounts that can help individuals pay for medical expenses with pre-tax dollars, and act as retirement accounts, providing a cushion similar to a 401(k). Tax advantaged accounts include:
- Health savings accounts (HSAs)
- Health reimbursement arrangements (HRAs)
- Flexible spending accounts (FSAs)
- Tax-advantaged transportation spending/commuter benefits accounts (TSAs)
Throughout recent years, the ECFC has been extremely instrumental in shaping policy. In fact, a few of the issues that the organization has been advocating for were recently signed into law through the Coronavirus Aid, Relief and Economic Security (CARES) Act. The American Bankers Association (ABA) HSA Council is another advocacy organization UMB belongs to that has also played a large role in shaping this policy.
New HSA-eligible items from the CARES Act
- Telehealth: the law adds payments for “telehealth and other remote care services” as high deductible health plan (HDHP)/HSA eligible. This provision is effective immediately and will last until December 31, 2021.
- Over-the-counter (OTC) drugs and menstrual care products: the law reinstates the ability to pay for certain OTC drugs and medicines with an HSA, FSA and HRA. It also adds the ability to pay with an HSA, FSA and HRA for menstrual care products. This provision will be effective for amounts paid after December 31, 2019 and for reimbursements of expenses incurred after December 31, 2019. Unlike the telehealth provision, this provision does not have an expiration date.
2019 HSA contributions extended to new tax filing deadline*
As you may be aware, the IRS extended the tax filing deadline to July 15, 2020. This extension allows HSA account owners until July 15 to make prior year (2019) contributions to their HSA up to the 2019 maximum contribution limits.
|HDHP Plan Type||2019 HSA Contribution Limit|
If you are 55 or older you can contribute an additional $1,000 to your HSA.
Special enrollment period offered in health plans
In addition to the CARES Act changes, some insurance carriers are allowing employees who previously waived health coverage through their employer to enroll during a special enrollment period. In 12 states, healthcare exchanges have introduced a limited special enrollment for individuals who lost their employer sponsored plans to enroll in an individual health plan.
Future health care proposals
We continue to work with both the ECFC and the ABA HSA Council to advance healthcare choices. Below are just a couple of the upcoming legislative proposals that we are hopeful will be passed in future stimulus packages.
- The Pandemic Health Care Access Act – This act would allow consumers to open an HSA with any type of health plan, waiving the requirement for the plan to be high deductible.
- Seniors and HSAs – Two acts have been introduced that would allow seniors enrolled in Medicare to continue to participate and contribute to an HSA. One act stipulates for working seniors only (this proposal has already passed the House of Representatives) and the other is more generic encompassing all seniors.
We will continue to keep you informed as new laws are passed that impact healthcare benefits. For the most up-to-date information on UMB’s operations and relief measures during the pandemic, please visit the UMB COVID-19 Preparation website.
*The IRS notice did not address an extension to withdraw excess HSA contributions or an extension for custodians who are required to file federal information returns, such as Form 5498-SA. Unless the IRS issues future guidance, the existing deadlines will apply and UMB will file Form 5498-SA by May 31, 2020 for contributions through April 15,2020. For additional information visit irs.gov‡ or contact your tax professional.
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