New Telehealth Safe Harbor Increases Design Flexibility of HSA-qualified Medical Plans

A provision in the One Big, Beautiful Bill Act creates opportunities for insurers and employers to offer monitoring of chronic conditions with no patient financial responsibility.

Health Savings Account insiders were disappointed in late June when the Senate did not adopt 10 key provisions that would relax eligibility rules and increase flexibility in designing HSA-qualified plans. After dropping all 10 provisions initially, the Senate later adopted three of them and added another: a safe harbor for virtual medical visits.

The term safe harbor in this context simply means that insurers (and employers who sponsor self-insured plans) can cover telemedicine visits below the deductible without disqualifying people covered on the plan from opening and funding a Health Savings Account. This concept, which was made temporary during the Covid-19 pandemic, has expired three times during the last five years. Now that it is permanent, physician practices, insurers, and employers can design with confidence virtual care programs that target conditions that require regular monitoring but have low levels of patient compliance.

History Lesson: Telemedicine and HSA-qualified Plans

Prior to the Covid-19 pandemic in 2020, telehealth visits for services other than select preventive care could not be covered below the deductible. Many HSA-qualified enrollees had access to virtual care, either through their medical plan (more common in recent years) or through their company's stand-alone telemedicine vendor (the more common access point prior to the mid-2010s). These services were offered at a market price (which ensured that enrollees would not be disqualified from opening and funding a Health Savings Account) and were delivered by licensed physicians with no relationship to the patient.

During the last nine months of 2020, the pandemic closed most physician offices. Medical personnel were often shifted to direct or indirect pandemic work. And patients were reluctant to sit in small physician waiting rooms with sick patients. Many Americans were not receiving routine screenings or treatment for non-serious conditions.

Congress stepped in with a telemedicine safe harbor for HSA-qualified plans. The new telemedicine benefit was different from what had existed previously. Traditional (brick-and-mortar) doctors equipped their practices to offer virtual care to their patients. And the service could be offered with no patient cost sharing, which encouraged utilization of a medium of interaction that was, for most patients (and many physicians), a novel experience. Suddenly, patients had access to their physician with the dual benefits of convenience (no travel or wait times) and no cost.

After the pandemic peaked, Congress renewed the safe harbor twice (although, both times, reflecting legislators' lack of understanding about how medical coverage works, with gaps in the safe-harbor protection). The safe harbor ended for plans that renewed after Dec. 31, 2024. Thus, anyone enrolled on coverage that renewed in 2025 no longer enjoyed the safe harbor.

The telemedicine provision in the One Big, Beautiful Bill Act closed the gap by making the safe harbor permanent and applying the law back to Jan. 1, 2025.

What the Safe Harbor Permits

The safe harbor is, in legislative jargon, permissive. This term means that insurers and employers (self-insured plan sponsors) are permitted to cover telemedicine services below the deductible. They are not required to do so. They have flexibility to cover telemedicine visits in full, apply them to the deductible, charge a copay, or cover different types of telemedicine visits (for example, with a primary-care physician versus a specialist, or the patient's doctor versus a physician employed by a telemedicine company) differently.

HSA-qualified Plans and Chronic Conditions

A deductible is a blunt instrument. An HSA-qualified plan most apply all services except select preventive care to a deductible of at least $1,650 (self-only plan) or $3,300 (family coverage. The law makes no distinction between high-value and low-value care. This failure to distinguish is magnified when patients suffer from a chronic condition that needs continued monitoring. Patient compliance suffers when the services are subject to the deductible and the patient is responsible for the $200 or more allowable charge of each visit.

Health Savings Account law makes some accommodations for chronic conditions. It offers a safe harbor for insulin and for tests and drugs tied to 14 specific diagnoses of chronic conditions. However, the law does not create a safe harbor for physician visits and monitoring of the patient's condition.

Sens. John Thune (R-SD) and Thomas Carper (D-DE) have introduced legislation that would permit more care for chronic conditions to be subject to a safe harbor. Their bill has not advanced through the legislative process, however.

Telemedicine and Chronic Conditions

The new telemedicine safe harbor offers an opening for plans to cover monitoring below the deductible, with little (copay) or no patient out-of-pocket spending. Under this provision, insurers designing HSA-qualified plans can look at their patient populations and determine which chronic conditions require regular monitoring that patients are not accessing. Whether the barrier is lack of money to pay for the services, lack of transportation to visit a physician in person, or lack of time to commute to and from the appointment and sit in the waiting room, delivering the service virtually at little or no patient out-of-pocket financial responsibility will increase patient compliance.

Large, self-employer insurers can leverage this opportunity as insurers do, looking at their employee population and the drivers of high claims. Companies can then design their HSA-qualified plan's cost sharing to encourage regular monitoring of chronic conditions whose outcomes improve with regular monitoring and adjusting treatment. For employers and employees, this targeted benefit does more than manage chronic conditions with a positive return on investment as measured by claims. It also reduces sick days when the condition flares up and keeps employees at work and on the clock longer as they trade a three-hour absence from work to travel to an appointment to a 30-minute virtual visit with the doctor.

The benefit extends beyond immediate claims savings. Happier, healthier employees are more productive and happier. And to the extent that employees value virtual, low- or no-cost monitoring through their company's HSA-qualified plan, they are less likely to leave the employer, thereby saving the cost of recruiting and training a replacement.

This provision would have been less meaningful a decade ago, when telemedicine was limited to companies that offered virtual care through mostly primary care doctors whose practices were limited to this medium of delivery. In the post-Covid world, however, nearly every medical practice is set up to deliver virtual care. Thus, patients can access not only specialists, but their specialists, to receive care. This continuity of care and familiarity with the physician are key components in successful monitoring because they extend beyond simply "reading the numbers" when evaluating the patient's condition and progress.

The Bottom Line

Although some purists lament a federal law that favors one form of physician-patient interaction (a virtual visit) over another (in-person visit), this provision will, in the hands of attentive insurers and employers, improve the overall health of patients with the most common chronic conditions - the illnesses that often disproportionately drive claims costs. The safe harbor represents and financial and medical breakthrough that is now permanent.

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HSA Wednesday Wisdom is published every other week, alternating with HSA Question of the Week. The content of this column is informational only. It is not intended, nor should the reader construe the content, as legal advice. Please consult your personal legal, tax, or financial counsel for information about how this information applies to you or your entity.