CARES ACT – Impact on HSAs, HCFSAs, and HRAs

CARES ACT – Impact on HSAs, HCFSAs, and HRAs

This advisory summarizes key provisions in the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) applying to employee benefit plans.

Over-the-Counter (OTC) Drugs and Menstrual Care Products (optional)

The CARES Act states that consumers can purchase OTC drugs and medicines with funds from their Health Savings Account (HSA), Health Care Flexible Spending Account (HCFSA) or Health Reimbursement Arrangement (HRA). Consumers may also receive reimbursement for OTC purchases through those accounts. In addition, menstrual products are now considered a qualified medical expense, meaning consumers can pay for or be reimbursed for these products through an HSA, HCFSA or HRA. This provision is effective for purchases made after December 31, 2019, and for reimbursements of expenses incurred after December 31, 2019. It does not have an expiration date.

Implementation Tips:

  • No changes are necessary to implement these changes to a Health Savings Account. HSA participants are responsible for tracking their own reimbursements and spending habits.  However, please see the final bullet (below) about delays for debit-cards that may affect processing for these items.
  • HCFSA – the employer/plan sponsor will need to amend their plans to permit these changes and implement them with the HCFSA vendor and debit-card-provider.
  • HRAs – likewise, the employer/plan sponsor will need to amend their plans to permit these changes and implement them with the HRA vendor and debit-card-provider. Many HRAs will choose not to implement these changes because the HRA’s purpose was to cover portions of the medical or prescription drug out of pocket costs and not OTC medicines.
  • Inventory Information Approval System (IIAS) is updated with SKUs (Stock-Keeping Units, the bar codes on products) and once programmed debit cards will permit these purchases. The update is expected to happen nationwide (rapidly) for the OTC expansion. Whereas the addition of menstrual care products may take longer for nationwide programming to take effect with all vendors and merchants.

Telehealth Changes (temporary – only for plan years beginning on/before 12/31/2021) – also optional

The CARES Act states that “telehealth and other remote care services” below the deductible will be permitted in an HSA-compatible high-deductible health plan (HDHP). This provision is effective immediately and will expire December 31, 2021. The bill does not specify what “telehealth and other remote care services” entails, but you can expect updates from us as we learn more either through regulations or DOL/Treasury FAQs.

Implementation Tips:

  • The employer/plan sponsor will need to amend their plans to permit this change. They will also need to coordinate the change with the bank (aka “vendor”) and any debit card provider (if that is offered by a third party).

Remember, this “safe harbor” guidance is only available for a limited time.  Given the importance of telehealth in the COVID-19 crisis this will come as a relief, enabling employers to temporarily remove safeguards put into place to ensure HDHP/HSA compatibility for telehealth, such as charging fair market value until participants meet the statutory minimum deductible. However, unless this relief is extended for plan years beginning on or after January 1, 2022, employers will need to revert to their current safeguards.

Health and Welfare Plans in General- these changes are not optional

  • Plans must cover all testing for COVID-19, without cost-sharing, even for those tests that have not yet received an emergency use authorization from the FDA. In addition, plans must cover all qualifying preventive items, services or vaccines for COVID-19 once developed, without cost sharing.
  • There is no exception to the cost-sharing rules for church groups and government sponsored health plans–all plans (fully insured or self-funded) need to comply.  This includes private companies and both for-profit and not-for-profit companies.
  • A group health plan or a health insurance issuer will pay the provider either the negotiated rate or, if no negotiated rate is in effect because the provider is out-of-network, the lesser of the cash price for the service as posted by the provider on a public website or a different negotiated rate. Any provider that attempts to charge more than these set costs is subject to civil monetary penalties of up to $300 per day.
  • Preventive Services Note – (once a vaccine is available). Private group and individual health insurance plans (all plans governed by ERISA) will be required to cover all qualifying preventive items, services or vaccines for COVID-19 once developed, without cost sharing, within 15 days after the service or vaccine has received a qualifying recommendation from either the United States Preventive Services Task Force or the Advisory Committee on Immunization Practices.

After an HCFSA or HRA plan is modified, by the ER (in writing), this will apply to claims incurred and paid after December 31, 2019. No modifications are necessary to permit this OTC change to HSAs.

Please speak with your Account Manager or Sales Executive for assistance with any of these changes.


In response to Coronavirus, AssuredPartners has recently launched a COVID-19 resources page and can be found here. AP Benefit Advisors’ COVID-19 resources page can be found here.

For more information, contact The information contained in this post, and any attachments, is not intended and should not be misconstrued as legal advice. You should contact your employment, benefits or ERISA attorney for legal direction.

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