CARES Act: Changes to Your Group Health Plan

May 26, 2020

With the pandemic at hand, do you wish you would have signed up for the group health insurance through your employer? Or, maybe it would have been smarter to choose a different plan option? What about pre-tax contributions to a medical savings account? Oops! - that slipped your mind. If this is you, you may be getting a “redo”.

A lot has changed, both personally and globally, since you enrolled in your employer's health plan for 2020. Last fall, no one could have predicted the COVID-19 pandemic. To that end, the Coronavirus Aid, Relief, and Economic Security (CARES) Act included flexibility for employers to temporarily modify their employee health plans, including Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs).

One of the provisions in the CARES Act provided no-cost testing for the coronavirus (without co-pays or first utilizing your deductible) for those insured under an employer-sponsored health plan. However, this did not include additional expenses related to health care needs that come along with a positive coronavirus outcome. To expand coverage, the CARES Act gives those enrolled in an employer-sponsored health plan the option to change their health coverage as well as their participation in the HSA and FSA. The Act also includes enhancements to the guidelines surrounding HSA and FSA usage.

Employer Health Insurance – Need a Change?

The CARES Act allows an employer to amend its group health insurance plan. If amended, it can provide employees the option to make a mid-year change in their original election. In addition, employees can change their usage of health and dependent care flexible spending accounts.

Even though you generally can’t make a mid-year change without a qualifying reason, an employer may amend its health plan under the CARES Act provisions to allow employees to take any of the following actions:

  • Make a new election to participate in the employer's health plan if coverage was initially declined.

  • Change the current election for health coverage to enroll in a different health plan covered by the same employer, including a change from self-only to family coverage.

  • Discontinue employer-sponsored coverage by a written statement that indicates his/her immediate enrollment in another health plan outside of employer's.

  •  Change the election for tax-free contributions to a health or dependent care FSA (initiate, revoke, reduce or increase).

For reference, in 2020, the maximum contribution amount for the healthcare FSA is $2,750 and $5,000 for the dependent care FSA. Contribution limits for the HSA in 2020 are $3,550 for individual and $7,100 for family. Participants age 55+ can make an additional $1,000 catch-up contribution.

If you are incurring more out-of-pocket medical or childcare expenses than you expected due to the coronavirus or other reasons, starting or increasing your pre-tax paycheck deductions to an FSA (healthcare or childcare) or HSA would be beneficial.

Changes to all High-deductible Health Plans

As mentioned, all testing for COVID-19 is paid-for by insurance with no out of pocket expense by the insured. Now, this extends to urgent care or doctor visits (in office or by telehealth) and emergency room visits due to coronavirus care. This requirement will remain in effect only while the public health emergency order is in place.

High deductible health plans paired with health savings accounts (HSAs) are now covering 100% of all telehealth services, whether COVID-19 related or not, retroactive to January 1, 2020. If the plan has a co-pay, the insured is still responsible for his/her share of the cost. This change is due to sunset on December 31, 2021.

New Flexibility for HSAs, FSAs, and HRAs

If you have an HSA, FSA, or Health Reimbursement Account (HRA), the eligible expenses that can be paid from these accounts has been expanded. You can now pay for over-the-counter medical products, including but not limited to medications, protective masks, diapers, and certain feminine hygiene products, from the account without tax or penalty. This change is retroactive to January 1, 2020, and is set to remain permanent in future years.

On May 12, the IRS made temporary changes to health and dependent care FSAs. These changes are retroactive to January 1, 2020, and were issued to aid in unexpected expenses due to the COVID-19 pandemic.

  • Up to $550 of unused FSA funds from 2019 can be carried over and used in 2020 (up from a maximum of $500).

  • The grace period for spending these unused funds for medical or dependent care is extended to December 31, 2020.

Summary

Check with your employer’s Human Resource professional to determine whether your group insurance plan has been amended based on the CARES Act. If so, this may be your chance for a “redo”. If amended, this may be your opportunity to change to another plan option that is a better fit. Likewise, if you're eligible to participate in the HSA or FSA, you can take advantage of adjusting your contributions and utilizing the funds for the revised list of over-the-counter medical needs. Be well!

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