How the CARES Act Made HSAs More Versatile

For the millions of American families who utilize health savings accounts (HSAs), 2020 has been a challenging year from an account management perspective. In light of the COVID-19 public health crisis, many HSA users were left with a major decision between using their HSA dollars to cover virus preparedness products and medical services (when they could obtain them safely!), and saving their funds for a larger medical emergency that we all thought could be right around the corner.

While 2020 will most likely be remembered for the COVID-19 public health crisis, the year is notable for the major flexible spending account (FSA) and HSA reform that came from the federal stimulus package, the CARES Act. For the first time in more than a decade, HSAs underwent a series of changes in product and service eligibility to make them more versatile and valuable for American families' financial bottom lines.

With 2020 in the rear view, there are still ways that HSA users can take advantage of these pro-consumer CARES Act changes. Let's examine a few of the most notable changes from this landmark legislation.

1. COVID-19 Testing and Treatment

Perhaps one of the biggest money-saving changes to come out of the CARES Act included a provision that allows employers to waive out-of-pocket costs for coronavirus testing and treatment for employees enrolled in a high-deductible health plan, reports BenefitsPro. This is a huge boost for HSA users who, if they had not already met their yearly deductible, would be on the hook for the full price of COVID-19 testing and treatment and may have been forced to dip into their HSA funds to cover the cost.

This provision built upon the protections enacted in the first coronavirus relief bill. The Families First Coronavirus Response Act (FFCRA), which preceded the CARES Act, ensured that all forms of public and private insurance, including self-funded plans, must now cover FDA-approved COVID-19 tests and costs associated with diagnostic testing with no cost-sharing, as long as the test is deemed medically appropriate by an attending health care provider, lasting for the duration of the public health emergency. According to KFF, the CARES Act bolstered this by requiring private plans to also reimburse out-of-network COVID-19 test claims at up to the cash price that the provider has posted on a public web site.

2. Over-the-counter (OTC) medicines and feminine care products are now eligible

Quite possibly one of the most exciting provisions to emerge from the CARES Act dramatically expanded the types of products HSA users can purchase with their health savings account dollars. First, the bill repealed the prescription requirement for OTC medicines. Since 2010, HSA users were required to obtain a prescription for over-the-counter medicines like Tylenol and Benadryl to be reimbursed through their accounts. This provision was completely removed and OTC drugs can now be purchased with FSA/HSA funds with no prescriptions required. And this isn't just good news, it's great news for the American healthcare system at large. According to the Consumer Healthcare Product Association (CHPA), it's estimated that $146 billion is saved annual by the U.S. healthcare system through the widespread use of OTC medicines and treatments.

Secondly, menstrual care products were made eligible for the first time ever. Tampons, pads, menstrual cups, period underwear and more feminine care products are now fully eligible under HSA eligibility requirements. With these two key product categories now open to HSA spending, this could be a great opportunity for working professionals and families to up their yearly HSA contribution, cover expected health purchases like OTC medicines and feminine care products without paying out-of-pocket, and maximize their yearly tax savings.

3. Take advantage of telehealth and telemedicine

Finally, visiting the doctor's office has been a harrowing experience for many Americans, from overcrowding to risking COVID-19 exposure, a doctor's visit isn't as simple as it used to be. Thanks to the CARES Act, telehealth is not only the safest option for most Americans, but an exemption has been made to help out high-deductible health plan (HDHP) users.

According to SHRM, The CARES Act allows HSA-compatible HDHPs to cover telemedicine free of cost sharing for plan years beginning on or before Dec. 31, 2021. This allows HDHPs to cover telehealth and other remote care services before participants have met their deductible without affecting their eligibility to make HSA contributions. That's a big change and one that will give HDHP users more freedom to pursue necessary treatment without having to worry about massive deductible costs. It's important to note that normal cost-sharing can still be imposed for telehealth visits, such as through co-pays that the plan may require after the deductible is paid. And this change is temporary: unless Congress chooses to renew them, this supplemental coverage will conclude on Dec. 31, 2021.

2020 has thrown a little bit of everything our way, but if there is one key lesson that we can learn from this whole experience is just how consequential our benefits decisions can be in a time of crisis. HSA users have an added advantage of a rainy day fund for healthcare expenses, but when that rainy day turns into a months-long shutdown, that advanced preparation is all the more valuable in a time of financial strain for many throughout the U.S.

Ultimately, the public health crisis has illuminated just how beneficial tax-free healthcare benefits can be to support American families, and the positive reforms born out of the CARES Act could be the catalyst for more positive health and benefits changes in the future.


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