Whether you’re a fan of the Buddy Holly version or Linda Ronstadt’s, you’ve got to admit “It’s so easy to fall in love” is a catchy tune. Just as it’s easy to get that song stuck in your head, it’s also easy to put your employee’s health savings accounts (HSAs) at risk!
HSAs are one of the many “consumer directed” programs that are touted as putting employee’s health care within their own control. The idea is that if consumers have an amount of money to spend on their own healthcare, they’ll be savvy about what services they seek and how much they spend on them, with the ultimate goal of making the healthcare marketplace more efficient. Congress gives tax advantages to accounts that qualify as HSAs in order to encourage employers to offer and employees to maintain them.
The tax advantages for an HSA, though, come at a cost. That cost includes the requirement that the HSA participant must bear the burden of satisfying a high deductible before they can tap into their HSA funds. Those high deductible rules make it hard for an employer to do generous things for their employees, even where it seems to be the reasonable or humane thing to do. For example, during the pandemic, it took a special exemption from the IRS to allow employers to offer first-dollar / no cost telehealth visits to employees with HSAs. The IRS recently issued guidance that opened a small window for employers to continue covering telehealth without violating HSA rules, but that window will close at the end of 2022. The IRS’s unwillingness to give greater relief is perhaps a signal that the IRS intends to take the HSA high deductible rules seriously. There are indications that Congress might act with a legislative solution, but until that happens, employers should not be overly generous with telehealth coverage for their HSA eligible employees.
In addition to telehealth, there are other incentives or special benefits that employers may be tempted to offer, especially to encourage retention during this era of labor shortage. Be careful, though, that your generosity doesn’t compromise your employees’ HSAs by relieving them of their obligation to bear the full weight of their HDHP coverage.