Smart Tax Planning

Got a high-deductible health plan? It may cover the cost of coronavirus testing

Key Points
  • The IRS announced that high-deductible health plans can pay for COVID-19 testing and treatment before you’ve met your annual deductible. Plans can also cover the cost of future vaccines.
  • Be aware that this isn’t a mandate, just an option. Find out if your plan will cover these expenses.
  • In 2020, annual deductibles in these plans are at least $1,400 for individual coverage or $2,800 for families.
A tour operator, wearing a protective mask, gestures as he leads a tour near the US Capitol in Washington, DC on March 9, 2020.
Andrew Caballero-Reynolds | AFP | Getty Images

High-deductible health insurance plans may cover the cost of coronavirus testing and treatment — without individuals having to meet their deductibles, the IRS said on Wednesday.

People with high-deductible insurance coverage must spend a specified amount of money each year before their insurance plan begins to pay for expenses.

Tax-advantaged health savings accounts work alongside these plans to help people meet the deductible.

In 2020, annual deductibles in high-deductible plans must be at least $1,400 for self-only coverage or $2,800 for family coverage, an expense that could dissuade people from seeking medical attention if they need it.

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The IRS announcement on Wednesday takes down that barrier for people affected by coronavirus. 

"This is a good thing," said Carolyn McClanahan, a physician and certified financial planner at Life Planning Partners in Jacksonville, Florida.

"The problem is that people avoid going in because they don't have the money to hit the deductible."

Vaccines would continue to be considered preventive care, the IRS said.

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Recently, a number of insurance companies have stepped up to help offset the cost of preventing, testing and treating coronavirus, according to America's Health Insurance Plans, a trade association for insurers.

Those steps include waiving copayments or doing away with requirements for prior approval for COVID-19 testing, AHIP said.

Employers offering high-deductible plans had been concerned about how this development could affect participants in those plans, said Katy Johnson, senior counsel, health policy at the American Benefits Council.

The recent clarification from the IRS addresses this.

However, it's important to be aware that while the taxman is permitting high-deductible plans to foot the bill for coronavirus testing and treatment, there's no guarantee that your plan will go along with the guidance.

It's not a mandate from the tax authority.

Make sure you contact your insurer or your human resources department to see where your plan stands. 

"Nothing is compelling those plans to pay," said McClanahan. 

CNBC reporter Bertha Coombs contributed to this report.