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Telemedicine benefits: Compliance issues for employers

Doctor on a telemedicine call waving a patient.

Telemedicine is an increasingly popular type of benefit that enables people to use technology-based communication (for example, videoconferencing) to access medical care without being in the same physical space as a healthcare provider. Telemedicine can make healthcare more accessible and affordable for individuals, while improving employee productivity by reducing healthcare-related absences.  

However, employers that implement telemedicine benefits should be aware of compliance concerns, including:  

  • the Affordable Care Act’s market reforms;  

  • ERISA’s reporting and disclosure requirements; and  

  • COBRA’s continuation coverage requirements.  

Employers can address these compliance concerns by integrating the telemedicine benefit with their group medical plans. Employers that sponsor high-deductible health plans should also consider how a telemedicine benefit may impact employees’ eligibility for health savings account contributions. 

Resources 

  • Department of Labor website on ERISA health plans and benefits.  

  • IRS Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans.

HSA eligibility  

Telemedicine programs that provide medical benefits before the HDHP deductible is satisfied normally don’t qualify for HSA eligibility. However, HDHPs can provide benefits for telehealth or other remote care services and COVID-19 testing and treatment before plan deductibles have been met. 

ACA market reforms  

Group health plans that do not qualify as “excepted benefits” are subject to several market reforms under the ACA. One of these reforms requires non-grandfathered group health plans to cover certain preventive care services without imposing cost-sharing requirements on the services. Preventive care services include: 

  • screenings; 

  • examinations and  

  • immunizations 

If a network provider provides these services, the plan cannot impose a deductible, copayment or other cost sharing.  

In most cases, a telemedicine benefit is a group health plan subject to the ACA’s market reforms, including the preventive care mandate. In general, a telemedicine benefit cannot comply with the ACA’s preventive care mandate on its own. This is because many preventive care services (for example, immunizations) require in-person visits with healthcare providers. Failing to comply with the ACA’s preventive care mandate may trigger an excise tax of $100 per day for each individual to whom the failure relates. 

Integrated telemedicine benefit  

A stand-alone telemedicine benefit will likely violate the ACA’s preventive care mandate and subject an employer to potential excise taxes. To avoid this compliance problem, employers can structure their telemedicine benefits as a component of their group medical plans. To integrate a telemedicine benefit with a group medical plan, the following criteria must be satisfied:  

  • only employees, spouses and other dependents who participate in the employer’s group medical plan are eligible for the telemedicine benefit; and  

  • employees can waive coverage only under both the telemedicine benefit and the group medical plan – they cannot waive coverage under just the telemedicine benefit.  

When a telemedicine benefit is integrated with a group medical plan, telemedicine charges count toward the medical plan’s out-of-pocket maximum and any preventive care services must be provided without cost sharing. 

Special rule for telehealth-only plans during the COVID-19 pandemic: In response to the pandemic, federal agencies issued special relief for telehealth-only plans. For plan years beginning during the COVID-19 public health emergency, a large employer (more than 50 employees) could offer standalone telehealth benefits and other remote care services to individuals who were not eligible for coverage under any other group health plan offered by the employer, without violating the ACA’s market reforms. These types of standalone arrangements are not permitted for plan years beginning after the PHE ended on May 11, 2023. 

ERISA  

ERISA sets minimum standards for employee benefit plans maintained by private-sector employers. ERISA exempts only two types of employers from its requirements: governmental and church employers. Many plans or programs that provide benefits to employees are considered employee benefit plans subject to ERISA.  

Employer-sponsored telemedicine benefits are considered group health plans subject to ERISA’s requirements. Under ERISA, employers are required to take the following steps for their employee benefit plans:  

  • adopt an official plan document that describes the plan’s terms and operations;  

  • explain the plan’s terms and rules to participants through a summary plan description;  

  • file an annual report (Form 5500) for the plan, unless a filing exemption applies;  

  • comply with certain fiduciary standards of conduct with respect to the plan; and  

  • establish a claims and appeals process for participants to receive benefits from the plan.  

Employers commonly integrate (or wrap) their telemedicine benefits with their group medical plans. Combining these benefits under one ERISA plan allows employers to satisfy ERISA’s requirements more easily. For example, rather than treating the telemedicine benefit as a separate ERISA plan, the telemedicine benefit can be described in the group medical plan’s SPD and included in the plan’s Form 5500 filing, if applicable. 

COBRA  

The Consolidated Omnibus Budget Reconciliation Act requires covered group health plans to offer continuation coverage to employees, spouses and dependent children when group health coverage would otherwise be lost due to certain specific events, called qualifying events.  

COBRA generally applies to group health plans maintained by private-sector employers with at least 20 employees on more than 50% of typical business days in the previous calendar year. COBRA does not apply to group health plans maintained by small employers (those with fewer than 20 employees) or churches. There are also special coverage rules for government employers, although, as a practical matter, most government group health plans are required to offer continuation coverage.  

Telemedicine benefits are considered group health plans subject to COBRA because they provide medical care. As explained above, employers typically bundle their telemedicine benefits with their group medical plans. This way, only employees who participate in the group medical plan are eligible for telemedicine benefits. When the benefits are integrated, the employer should design its COBRA practices so that only qualified beneficiaries who elect COBRA for the group medical plan are eligible for telemedicine benefits. 

HSA eligibility  

Employers that offer HDHPs that are compatible with HSAs should consider how a telemedicine benefit may impact participants’ HSA eligibility. The Internal Revenue Service has not specifically addressed the impact of telemedicine on HSA eligibility. However, the general rules for HSA contributions strictly limit the types of health plan coverage that eligible individuals may have.  

To be eligible for HSA contributions, an individual generally cannot have health coverage other than HDHP coverage. This means an HSA-eligible individual cannot be covered under a health plan that provides coverage below the HDHP minimum annual deductible. Whether telemedicine disqualifies coverage for HSA purposes depends on how the telemedicine benefit is structured.  

Note that there are special rules for HDHPs due to the COVID-19 pandemic. These rules allow HDHPs to provide benefits for telehealth or other remote care services before plan deductibles have been met without jeopardizing HSA eligibility. These special rules are discussed below in the “Special rules for telehealth coverage due to the COVID-19 pandemic” section.  

Aside from these special rules, telemedicine programs that provide free or reduced-cost medical benefits before the HDHP deductible is satisfied to disqualify coverage for HSA eligibility purposes. Under the IRS’ general rules for HSA eligibility, a telemedicine program may not prevent an individual from contributing to an HSA if the program satisfies one of the design options described below: 

  • The telemedicine program is offered as part of the HDHP, and the program’s benefits are subject to the HDHP deductible (except preventive care benefits). This means that participants would be required to pay the fair market value of the services (or managed care rates for discounted health services, if applicable) until the HDHP deductible is satisfied. Once their HDHP deductibles have been satisfied, employees can access free or low-cost medical benefits without jeopardizing their HSA eligibility.  

  • The telemedicine program is not considered a "health plan" under the HSA eligibility rules because it does not provide significant benefits for medical care or treatment. The IRS has not provided specific rules for determining when medical benefits are significant. The IRS has indicated, however, that the amount, scope and duration of covered services should be considered. Because telemedicine benefits are often like the services covered under the HDHP, it may be difficult for most telemedicine programs to satisfy this exception.  

  • Benefits under the telemedicine program are limited to preventive care services. Because most HDHPs are required to cover preventive care benefits without cost sharing, this design option may not be attractive to many employers. 

Special rules for telehealth coverage due to COVID-19 pandemic: Effective Jan. 1, 2020, the Coronavirus Aid, Relief and Economic Security Act (CARES Act) allowed HDHPs to cover telehealth or other remote care services without a deductible (or with a deductible below the minimum HDHP deductible) without impacting HSA eligibility for plan years beginning before Jan. 1, 2022. A spending bill extended this relief to telehealth services provided in months beginning after March 31, 2022, and before Jan. 1, 2023. The Consolidated Appropriations Act, 2023, signed into law on Dec. 29, 2022, further extended this telehealth exception for plan years beginning after Dec. 31, 2022, and before Jan. 1, 2025. This means that HDHPs may waive the deductible for telehealth services without jeopardizing HSA eligibility for plan years beginning in 2023 and 2024. 

Is telemedicine right for you? TruePlan can help. 

Telemedicine provides a wide range of benefits for both employees and employers. If you need help determining whether telemedicine is right for your health plan, contact TruePlan today! You can also check out our telemedicine benefits toolkit, which includes a helpful guide and introductory video.

Our team of experts will take a tailored approach to your employee benefits, ensuring they align with your organization’s unique needs.  

This Compliance Overview is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. ©2019-20, 2024 Zywave, Inc. All rights reserved. 

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