HDHP Telehealth Coverage and First-Dollar Benefits

Telehealth benefits occupy a uniquely contested space within High-Deductible Health Plan rules because federal law temporarily severed the normal link between first-dollar coverage and HSA eligibility. This page covers how telehealth fits into HDHP cost structures, the statutory history of pandemic-era relief, how pre-deductible telehealth coverage interacts with HSA eligibility, and the decision boundaries plan sponsors and enrollees face when telehealth is on the benefit schedule.

Definition and scope

A "first-dollar benefit" is any covered service for which the plan pays — even partially — before the enrollee satisfies the annual deductible. Under Internal Revenue Code § 223, an individual enrolled in an HDHP may only contribute to a Health Savings Account if the plan covers nothing other than preventive care before the deductible threshold (IRS Publication 969). Telehealth services — a routine sick visit conducted via video, a mental health session, or an urgent-care consultation by phone — are not preventive care under the § 223 definition, so covering them pre-deductible historically disqualified enrollees from contributing to an HSA.

Congress created a narrow exception beginning with the CARES Act of 2020 (Pub. L. 116-136), which permitted HDHPs to cover telehealth services before the deductible without causing HSA disqualification. That relief expired, was revived, and has been extended through subsequent legislation. The Consolidated Appropriations Act of 2023 (Pub. L. 117-328) extended the telehealth safe harbor through plan years beginning before January 1, 2025. As of that legislative text, plan years starting on or after January 1, 2025 no longer benefit from the safe harbor unless Congress acts again.

The scope of the issue is substantial: the Kaiser Family Foundation's 2023 Employer Health Benefits Survey found that 92% of large firms offering health benefits made telehealth available, and a large proportion of those firms offered HDHPs as their primary or only plan option.

How it works

Under normal HDHP rules, the mechanism operates as follows:

  1. Deductible applies first. All non-preventive, non-exempt services generate cost-sharing at the negotiated rate until the enrollee meets the statutory minimum deductible — $1,600 for self-only coverage and $3,200 for family coverage in 2024 (IRS Rev. Proc. 2023-23).
  2. Telehealth without the safe harbor = disqualification. If a plan covers telehealth at no cost (or reduced cost) before the deductible, the enrollee becomes ineligible to contribute to an HSA for any month that coverage is in effect, under IRS Notice 2004-2.
  3. Telehealth with the safe harbor = HSA eligibility preserved. During covered plan years under the CARES Act extension, a plan may waive cost-sharing for telehealth visits pre-deductible without stripping HSA eligibility. The IRS clarified this in Notice 2020-29 and subsequent notices.
  4. Post-deductible telehealth. Once the deductible is satisfied, telehealth is treated like any other service — the plan pays its share per the Summary of Benefits and Coverage, and the encounter does not affect HSA eligibility.

The contrast is stark: an enrollee in a plan year covered by the safe harbor can use telehealth freely pre-deductible and fund an HSA up to the 2024 limit of $4,150 (self-only) or $8,300 (family) (IRS Rev. Proc. 2023-23). An enrollee in a post-safe-harbor plan year who uses a pre-deductible telehealth benefit loses HSA contribution rights for every month that benefit was available — even months in which no telehealth visit occurred, per IRS guidance on disqualifying coverage.

Common scenarios

Scenario A — Employer-sponsored HDHP with safe-harbor telehealth (plan year within the extended window): An employee's plan begins on January 1, 2024. The employer waives the $0–$40 telehealth copay pre-deductible. Because the plan year starts before January 1, 2025, the safe harbor applies. The employee can contribute the full $4,150 to an HSA and use telehealth for a $0 urgent-care visit in February without penalty. This is the most common scenario among large employers who retained telehealth waivers through the extension period.

Scenario B — HDHP with no telehealth waiver (baseline compliant plan): The plan charges the full deductible-applicable cost for telehealth. A telehealth visit is billed at the negotiated rate — often $40–$80 — and counts toward the deductible. HSA eligibility is unaffected. This structure remained compliant throughout and after the safe-harbor window. Enrollees who are heavy telehealth users may find this costlier per visit but preserves the full tax advantage detailed at HSA triple tax advantage explained.

Scenario C — Post-safe-harbor plan year with retained telehealth waiver: A plan beginning January 1, 2025 that still waives telehealth cost-sharing pre-deductible disqualifies enrollees from HSA contributions for affected months. Employers who did not restructure their benefit design in time face a situation where employees unknowingly lose HSA eligibility — a compliance risk flagged by the American Benefits Council.

Scenario D — Mental health telehealth under federal parity rules: The Mental Health Parity and Addiction Equity Act (29 U.S.C. § 1185a) requires that mental health telehealth cost-sharing not be more restrictive than medical/surgical telehealth cost-sharing. An HDHP that waives physical-medicine telehealth but applies the deductible to behavioral telehealth may violate parity, independent of the HSA question. This intersects with the broader HDHP mental health and behavioral health benefits framework.

Decision boundaries

Plan sponsors and individual enrollees face distinct decision points depending on plan year timing and benefit design goals.

For plan sponsors:

For individual enrollees:

The interaction between telehealth design and HSA eligibility is one of the more technically demanding areas in HDHP plan design options and strategy, because it requires simultaneous attention to IRS thresholds, federal parity law, and legislative expiration dates.

References

The law belongs to the people. Georgia v. Public.Resource.Org, 590 U.S. (2020)