There are a lot of rules about Health Savings Accounts (HSAs) because of the tax breaks associated with them.
In order to contribute to an HSA you have to be enrolled in an HSA-qualified plan. Those plans cannot provide “first dollar benefits” other than preventive care. So you are ineligible if your plan provides a copay for an office visit or for prescription drugs.
That raises the question about telemedicine:
Does using telemedicine disqualify you from contributing to an HSA?
First, it is important to differentiate between two questions:
Can you offer a telemedicine plan alongside an HSA?
Can you pay for a telemedicine plan using HSA funds?
To answer the first question, it is important to know that a telemedicine plan is not insurance. Also, telemedicine plans are not intended to replace your primary care physician or treat chronic or emergency conditions.
Because the limitations to HSAs apply to insurance programs that cover all out of pocket expenses, the first dollar coverage stipulation shouldn’t apply.
In other words, because telemedicine plans are not insurance and are only meant for acute, non-emergency conditions, we are good to go!
So, yes, you can offer a telemedicine plan along with an HSA.
The second question is a bit trickier and really depends on how your plan is designed. The regulations around HSAs like to see a direct correlation between money spent and services received. They don’t like money being spend on a program that gives you the right to use it, but rather, they like money being spent in a manner that you can see money going out in direct exchange for services coming in.
The telemedicine service we utilize for our clients, Virtual Care, is set up with no copay.
So with that setup, you are paying for the right to use the service, rather than paying for each particular use (as you would with a copay). There is not a strict dollar out, services received relationship.
As a result, you cannot pay for the Virtual Care plan using an HSA (because there is no copay).
As a general rule, you cannot pay for a monthly telemedicine service with an HSA, but if your plan is set up where you have a copay for a consultation, you can pay that copay with HSA funds.
Other Considerations about HSAs and Telemedicine
The amount of money that is saved by each employee by not having to pay for doctors visits, even paying with pre-tax money, is much greater than the amount they save by having that money be tax-exempt. So, it’s much better for an employee to have to contribute less money to their HSA because they don’t need as much, than it is for them to contribute more, just because it’s tax-exempt.
While this is tricky, and we aren’t lawyers, we are confident that these guidelines are correct. As always, if you have any questions, you’re welcome to contact us.