The Internal Revenue Service (IRS) has issued Notice 2023-37, [1] declaring the cessation of unique provisions enabling high deductible health plans (HDHP) to extend certain benefits specifically for COVID-19 diagnosis and treatment before the participant had met his/her deductible for the plan year. These provisions were introduced during the COVID-19 public health emergency (PHE). The notice modifies the guidance found in Notice 2020-15 and provides clarification of Notice 2004-23.

The Notice provides a summary of its key points as follows:

This notice also clarifies whether certain items and services are treated as preventive care under section 223(c)(2)(C). Specifically, this notice clarifies that the preventive care safe harbor, as described in Notice 2004-23, 2004-15 IRB 725, does not include screening (i.e., testing) for COVID-19, effective as of the date of publication of this notice. This notice also provides that items and services recommended with an “A” or “B” rating by the United States Preventive Services Task Force (USPSTF) on or after March 23, 2010, are treated as preventive care for purposes of section 223(c)(2)(C), regardless of whether these items and services must be covered, without cost sharing, under Public Health Service Act (PHS Act) section 2713.[2]

Summary of the Original Relief and End of the PHE

The Notice begins by describing the relief originally provided in Notice 2020-15:

In March 2020, the Treasury Department and the IRS issued Notice 2020-15. The notice provides that due to the unprecedented public health emergency posed by COVID-19, and the need to eliminate potential administrative and financial barriers to testing for and treatment of COVID-19, a health plan that otherwise satisfies the requirements to be an HDHP under section 223(c)(2)(A) will not fail to be an HDHP merely because the health plan provides benefits for medical care services and items purchased related to testing for and treatment of COVID-19 prior to the satisfaction of the applicable minimum deductible. As a result, individuals covered by such a plan will not fail to be eligible individuals under section 223(c)(1) merely because of the provision of those health benefits prior to the satisfaction of the applicable minimum deductible.[3]

Furthermore, the Notice details the chronology of the Public Health Emergency (PHE), its conclusion, and the earlier IRS guidance that permitted continued adherence to Notice 2020-15 until the issuance of a new directive. The present Notice thus serves as the anticipated updated guidance.

On January 31, 2020, the Secretary of Health and Human Services (HHS) declared that a nationwide PHE existed as of January 27, 2020, as a result of COVID-19. This declaration was continually renewed by the HHS Secretary, most recently effective February 11, 2023. On January 30 and February 9, 2023, respectively, the President and the HHS Secretary announced their intent to end the COVID-19 National Emergency and the PHE on May 11, 2023. On February 10, 2023, the Federal Emergency Management Agency gave notice in the Federal Register that the national emergency under the Stafford Act would end on May 11, 2023. On April 10, 2023, the President signed H.J. Res. 7 ending the national emergency under the National Emergencies Act on April 10, 2023.

On March 29, 2023, the Departments of Labor, HHS, and the Treasury (the Departments) issued Frequently Asked Questions (FAQs) under the heading, FAQs About Families First Coronavirus Response Act, Coronavirus Aid, Relief, and Economic Security Act, and Health Insurance Portability and Accountability Act Implementation Part 58 (FAQs Part 58), which address changes in various rules as the result of the end of the COVID-19 National Emergency and the PHE. Question and Answer 8 of FAQs Part 58 states that, while Notice 2020-15 applies until further guidance is issued, the Treasury Department and the IRS are reviewing the appropriateness of continuing the relief in Notice 2020-15 given the anticipated end of the COVID-19 National Emergency and the PHE and anticipate issuing additional guidance in the near future.[4]

Benefits No Longer Allowed to Be Covered Prior to Satisfaction of Deductible

The Notice stipulates that, for plan years ending after December 31, 2024, high deductible health plans (HDHPs) will no longer be permitted to offer certain benefits to insured beneficiaries at no cost before the beneficiaries meet the yearly deductible:

The Treasury Department and the IRS have determined that, with the end of the COVID-19 National Emergency and the PHE, the relief described in Notice 2020-15 is no longer needed. Accordingly, this notice modifies Notice 2020-15 to provide that the relief described in Notice 2020-15 applies only with respect to plan years ending on or before December 31, 2024. For subsequent plan years, an HDHP is not permitted to provide health benefits associated with testing for and treatment of COVID-19 without a deductible, or with a deductible below the minimum deductible (for self-only or family coverage) for an HDHP, except as otherwise provided in this notice.[5]

The Notice explains the IRS’s stance on why COVID-19 screenings do not qualify as preventive care under Internal Revenue Code (IRC) §223(c)(2)(C).

The Treasury Department and the IRS note that Notice 2004-23 provides that preventive care under section 223(c)(2)(C) includes, but is not limited to, screening services as specified in the Appendix to Notice 2004-23. However, preventive care does not generally include any service or benefit intended to treat an existing illness, injury, or condition. As part of the preventive care safe harbor, the Appendix to Notice 2004-23 includes Infectious Diseases Screening Services for the following infections: Bacteriuria, Chlamydial Infection, Gonorrhea, Hepatitis B Virus Infection, Hepatitis C, Human Immunodeficiency Virus (HIV) Infection, Syphilis, and Tuberculosis Infection. Screenings for common and episodic illnesses, such as the flu, are not included on the list. Accordingly, the Treasury Department and the IRS are of the view that COVID-19 differs from the types of infectious diseases included in the preventive care safe harbor as specified in Notice 2004-23, and this notice clarifies that the preventive care safe harbor as described in Notice 2004-23 does not include screening (i.e., testing) for COVID-19, effective as of the date of publication of this notice.[6]

Nevertheless, the Notice further stipulates that if the United States Preventive Services Task Force (USPSTF) were to endorse such tests with an “A” or “B” rating in the future, these tests would then be recognized as preventive care:

In addition, the Treasury Department and the IRS note that on April 13, 2023, the Departments issued FAQs entitled, FAQs About Affordable Care Act and Coronavirus Aid, Relief, and Economic Security Act Implementation Part 59 (FAQs Part 59), which provide initial guidance on how the decision in Braidwood Management Inc. v. Becerra affects the requirement to cover preventive services without cost sharing under PHS Act section 2713. Question and Answer 7 of FAQs Part 59 states that, until further guidance is issued, items and services recommended with an “A” or “B” rating by the USPSTF on or after March 23, 2010, will be treated as preventive care for purposes of section 223(c)(2)(C) of the Code, regardless of whether these items and services must be covered, without cost sharing, under PHS Act section 2713.

Consistent with the position taken in Question and Answer 7 of FAQs Part 59, this notice provides that items and services recommended with an “A” or “B” rating by the USPSTF on or after March 23, 2010, are treated as preventive care for purposes of section 223(c)(2)(C) of the Code, regardless of whether these items and services must be covered, without cost sharing, under PHS Act section 2713. Accordingly, if COVID-19 testing were to be recommended with an “A” or “B” rating by the USPSTF, then that testing would be treated as preventive care under section 223(c)(2)(C) of the Code, regardless of whether it must be covered, without cost sharing, under PHS Act section 2713.[7]

[1] Notice 2023-37, June 23, 2023, https://www.taxnotes.com/research/federal/irs-guidance/notices/health-plan-guidance-modified-for-end-of-covid-19-emergency/7gx0k

[2] Notice 2023-37, June 23, 2023

[3] Notice 2023-37, June 23, 2023

[4] Notice 2023-37, June 23, 2023

[5] Notice 2023-37, June 23, 2023

[6] Notice 2023-37, June 23, 2023

[7] Notice 2023-37, June 23, 2023