March 25, 2025

Telehealth benefits experienced a rapid surge in utilization during the COVID-19 pandemic. Even now, almost two years after the national public health emergency was declared over, telehealth benefits remain a popular component of many group health plans. According to the Kaiser Family Foundation’s 2023 Employer Health Benefits Survey, 91% of large employer group health plans offer telemedicine benefits in some capacity. Telehealth is poised to take on an even greater role within health plans as AI expands the personalization, integration, and availability of virtual care. However, with the expiration of the pandemic-era relief measure at the end of 2024, which allowed first dollar telehealth coverage for HSA contributors and was not renewed in the latest federal budget, employers should now review their telehealth programs to ensure compliance with current regulations. 

Telehealth Refresher

Telehealth benefits can include a variety of services, including patient consultations that function as physician office visits, orders for diagnostic tests and lab work, post-surgical follow-up, and general health monitoring. Telehealth utilization has grown dramatically in recent years, especially during the COVID-19 pandemic, as patients sought access to services while providers implemented social distancing protocols. Telehealth for mental health support has become particularly popular, with numerous employers offering employees and their dependents access to low- or no-cost telemental health services. 

It’s not clear how return to in-person work orders might impact the utilization of telehealth within employer group health plans. As some employees transition back to in-person work environments, the demand for telehealth services might decline. This shift may be due partly to the increased accessibility of physical medical facilities and patient preference for face-to-face consultations. That said, telehealth services will remain a vital component for remote workers and those seeking convenience and flexibility in their healthcare options. Employers will need to balance the integration of telehealth services with traditional in-person care to meet the diverse needs of their workforce.

Many plan sponsors add telehealth services to their plans in an effort to reduce costs, as physician consultations through telehealth can often be less expensive than in-person office visits. Additionally, employers can reduce costs associated with urgent care and emergency room visits when employees use virtual care options instead. Employers also see a reduction in absenteeism due to illness when new conditions are treated early via virtual care visits. Less time traveling to a doctor’s office means less time away from work. 

At the same time, it is important for employers to consider the downsides of expanded telehealth access and find the right balance within the group health plan. From a financial perspective, overuse of telehealth has the potential to significantly increase medical costs. As more people gain access, they may be more inclined to call a provider on the phone than go into the office. As a result, this can contribute to overutilization and higher costs. Also, the promotion of telehealth primary care is less certain to be an adequate substitute for an in-person primary care provider relationship, as it is difficult for primary care providers to effectively counsel patients without seeing their body language or nonverbal feedback.

Telehealth Benefits and High-Deductible Health Plans 

To be eligible to make or receive tax-favored contributions to an HSA, an individual must be covered under a qualified HDHP and have no “impermissible health coverage.” In the context of HSA eligibility, impermissible coverage refers to any non-HDHP health benefit that provides “first dollar coverage,” meaning coverage provided before the statutory minimum HDHP deductible has been met.  

A telehealth “exception” was enacted in 2020 during the COVID-19 pandemic to increase participant access to healthcare without in-person contact risk. This optional relief was extended post-pandemic. However, the relief expired for plan years beginning on January 1, 2025, and was not addressed in the most recent government funding bill. Consequently, telehealth benefits are once again considered impermissible coverage with respect to HSAs (until the HDHP deductible has been met).

Fair Market Value Conundrum 

As mentioned above, plan sponsors offering telehealth services to HSA-eligible employees must be mindful of the tax implications if these services are covered before the HDHP deductible is satisfied. For the employee to maintain HSA eligibility, the fair market value (FMV) of telehealth benefits – unless otherwise provided for permitted expenses like preventive care – must be applied towards the HDHP deductible. For further information about HSA eligibility and impermissible coverage, PPI clients can download a copy of the publication Health Savings Accounts: A Guide for Employers from the PPI Client Help Center. 

Tax law provides that FMV is generally based on the amount that an individual would have to pay for a benefit in an arm's-length transaction in the marketplace. However, determining FMV for telehealth services is not always straightforward due to disjointed payment structures, varying service types, and the involvement of multiple practitioners and technologies. Additional considerations for determining FMV might include usual and customary charges for similar telehealth services in the geographic area, the duration of the consultation, and the qualifications of the healthcare provider. A copay or coinsurance amount is not considered to be FMV. In many instances, a health plan will rely on the telehealth service vendor to determine the FMV of a particular service. 

In managing the HDHP deductible for purposes of HSA eligibility, careful consideration must be given to how telehealth services are structured and accounted for and whether they are integrated into the major medical plan or offered separately. Telehealth services can be subcontracted to a vendor but ultimately integrated into the major medical plan offering. In that case, the health insurer (or TPA in the case of a self-insured plan) controls the administration of expenses. Thus, when an individual incurs a telehealth expense before the statutory minimum deductible has been satisfied deductible, the FMV can be communicated to the plan and applied accordingly.  

However, when telehealth services are offered as a stand-alone product to supplement the major medical coverage, there may be no clear entity responsible for administering these expenses in relation to the HDHP deductible. The telehealth vendor is unlikely to have access to the necessary individual information or the administrative authority required to determine whether a deductible has been satisfied, making it difficult to coordinate claims while ensuring the individual remains HSA eligible.  

Other Compliance Considerations  

Employers that implement telehealth benefits must be mindful of several additional compliance considerations, including ACA insurance market reforms, ERISA reporting and disclosure requirements, COBRA continuation coverage requirements, and HIPAA privacy and security protections.  

Group health plans that do not qualify as “excepted benefits” are subject to a number of insurance market reforms under the ACA, including coverage of preventive care services (such as screenings, examinations, and immunizations). If these services are provided by a network provider, the plan cannot impose a deductible, copayment, or other cost-sharing. In most cases, a telehealth benefit would be subject to the ACA’s insurance market reforms, including the preventive care mandate. However, a telehealth benefit cannot comply with the ACA’s preventive care mandate on its own because many preventive care services (such as immunizations) require in-person visits with healthcare providers. As a result, a stand-alone telehealth benefit will most likely violate the ACA’s preventive care mandate and subject an employer to potential excise taxes. To avoid this issue, many employers will structure their telehealth benefits as a component of their group health plan.  

Employer-sponsored telemedicine coverage that provides “significant benefits regarding medical care or treatment” is considered group health plan coverage that is subject to ERISA’s requirements. These include explaining the plan’s terms and rules to participants through a summary plan description (SPD), filing an annual report (Form 5500) for the plan, and complying with certain fiduciary standards of conduct with respect to the plan. Furthermore, such significant telemedicine coverage would be considered group health plans that are subject to COBRA. Employers will typically design their COBRA practices so that only qualified beneficiaries who elect COBRA for the group medical plan are eligible for telemedicine benefits. 

As a group health plan benefit, telehealth is subject to HIPAA’s Privacy, Security, and Breach Notification Rules. Service providers are accessing and transmitting protected health information (PHI) on behalf of the plan. When provided by a third-party platform outside of the carrier or TPA, the program is likely in a business associate relationship with the plan; as such, there should be a signed Business Associate Agreement in place. Because of the accessible nature of telehealth, these programs are particularly vulnerable to security threats. Thus, it is essential that group health plans perform a risk analysis and risk management of the program to ensure participants’ electronic PHI is not compromised.

Final Thoughts

The end of the COVID-19 national public health emergency – and the expiration of certain relief measures tied to the pandemic – leaves telemedicine in a transitional phase. Though federal regulatory and legislative developments may continue to be in flux in the short term, recent developments demand that employers take the time now to review their telehealth arrangements for compliance.