High deductible health plans can cover medical costs for coronavirus

Mar 12, 2020
Mar 12, 2020
0 min. read

IRS issues new guidance on testing and treatment for COVID-19

On March 11, 2020, the IRS issued Notice 2020-15 that allows high deductible health plans (HDHPs) to pay for testing and treatment of the coronavirus (COVID-19) without jeopardizing their tax status. Consequently, an individual enrolled in an HDHP that covers these costs continues to be eligible to contribute to a health savings account (HSA).


A health savings account is an investment vehicle that allows tax-free contributions, earnings and distributions for the payment of medical expenses. In order to contribute to an HSA, an individual must be enrolled in a high deductible health plan and cannot be enrolled in other non-HDHP coverage. To qualify as an HDHP, a health plan must meet certain limits on deductibles and out-of-pocket expenses. For 2020, the minimum annual deductible is $1,400 for self-only coverage (for one person) and $2,800 for family coverage (for more than one person).  

In order to maintain its status as an HDHP, a health plan generally cannot pay for medical expenses before the minimum annual deductible is met. There are exceptions for certain medical expenses such as preventive care expenses, which includes vaccinations. The IRS is now adding exceptions for medical expenses related to the coronavirus.

Coronavirus guidance

Due to the public health emergency posed by the coronavirus, the federal government is working to eliminate administrative and financial barriers to testing and treatment. Consequently, the IRS has determined that an HDHP can cover the costs of medical care services and items purchased related to testing for and treatment of COVID-19 prior to the satisfaction of the applicable minimum deductible. An HDHP that covers these COVID-19 expenses will remain an HDHP for tax purposes. Furthermore, individuals enrolled in an HDHP that covers COVID-19 medical expenses prior to satisfaction of the applicable minimum deductible would remain HSA eligible.

The IRS indicated that Notice 2020-15 does not modify previous guidance with respect to the requirements to be an HDHP other than with respect to the relief for testing and treatment of COVID-19. The notice is intended to provide flexibility to HDHPs; however, individuals will need to review the terms of their particular health plan to determine the coronavirus expenses covered by the plan and any applicable deductibles.

This IRS guidance is welcome news for individuals enrolled in high deductible health plans who contribute to health savings accounts. For more information on HSAs, see our article Health savings accounts: A tax-free way to pay for medical expenses.

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