Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) Provisions Affecting Welfare Benefit Plans
What Employers Need to Know
Over-The-Counter Drugs and Medicines May Be Reimbursable From FSAs and HSAs
The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) repeals sections of the Internal Revenue Code that do not permit over-the-counter drugs and medicines from being reimbursable under health flexible spending accounts (including health reimbursement arrangements) and health savings accounts on a tax-free basis and replaces it with a provision permitting plans to reimburse expenses incurred for menstrual care products. In addition, it also appears that other over-the-counter drugs and medicines are now reimbursable as well. This provision is effective for items purchased on or after January 1, 2020.
In order for these items to be reimbursable, employers will need to amend their cafeteria plans and health flexible spending account and health reimbursement arrangement plan documents and summary plan descriptions.
Employers Can Pay Employees’ Student Loans on a Tax-Free Basis
The CARES Act will permit employers to adopt an educational assistance program in which it pays employees’ qualifying student loans (or reimburse employees for paying them) on a tax free basis for up to $5,250. This provision applies to loan payments, including both principal and interest, made after the enactment of the CARES Act and, unless extended, expires on December 31, 2020.
Employers wanting to provide this new employee benefit must adopt a written plan and comply with certain requirements of the Internal Revenue Code, including that the program not discriminate in favor of highly compensated employees.
Note that these payments may still be taxable compensation for state and local income tax purposes.
COVID-19 Testing and Services Must Be Provided Without Cost Sharing
Group health plans must cover, without cost-sharing, any qualifying coronavirus preventive service. A “qualifying coronavirus preventive service” means an item, service or immunization that is intended to prevent or mitigate COVID-19 that has been recommended by the U.S. Preventive Services Task Force or the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention.
Additionally, the CARES Act expanded the types of diagnostic testing required to be covered without cost-sharing under the Families First Coronavirus Response Act.
For plan years beginning on or before Dec. 31, 2021, a health plan shall not fail to be a high-deductible health plan for health savings account contribution purposes if the plan covers telehealth and certain other remote care services without applying a deductible towards the cost of such services.
This resolves a technical conflict in IRS guidance on telehealth services and HSA eligibility and the Families First Coronavirus Response Act’s requirements to cover COVID-19 services without cost-sharing. Telehealth services are certain to flourish as a result of the COVID-19 emergency and it is a positive sign that this conflict was addressed in the CARES Act.
Out-Of-Network Providers Reimbursement
While employees will not be generally subject to cost sharing for receiving COVID-19 diagnostic testing, health plans and insurers are still required to pay the provider of the diagnostic testing for the cost of these services. The CARES Act requires that the payor pay the negotiated rate, if there is negotiated rate for such service with the provider, or, if there is no negotiated rate, the cash price for such service as the provider will list on a public website.
It is possible that this will have the unintended effect of raising the cost to plans to the extent that employees get treatment out-of-network. Self-insured employers may want to check with their third-party administrators to see how this provision will affect their costs.
If you have any questions concerning the CARES Act, please contact Charles C. Scheim at 610.478.2282, or reach out to the Stevens & Lee attorney with whom you regularly work.
This News Alert has been prepared for informational purposes only and should not be construed as, and does not constitute, legal advice on any specific matter. For more information, please see the disclaimer.