Navigating the Post-2024 Telehealth Landscape: How Employers Can Keep Telehealth Free with HDHPs
For small to mid-sized business owners and benefits brokers, the expiration of a key telehealth provision on December 31, 2024, poses a challenge—and an opportunity. The ability to offer first-dollar (zero cost-share) telehealth services within a High-Deductible Health Plan (HDHP) compatible with Health Savings Accounts (HSAs) has been a game-changer for employee access to care. However, with this relief now ended, employers must adapt to maintain this valuable benefit without disrupting HSA eligibility. A recent legal memo outlines a clear, compliant path forward, rooted in IRS Publication 969, to keep telehealth free for employees in 2025 and beyond. Here’s what you need to know as of March 5, 2025, and how to act on it.
The End of First-Dollar Telehealth in HDHPs
The backstory begins with the CARES Act in 2020, which allowed HDHPs to cover telehealth and remote care services without requiring employees to meet their deductible first. This "first-dollar" coverage, extended multiple times, made virtual care accessible during the COVID-19 pandemic and beyond, with the latest extension running through December 31, 2024. The goal was simple: ensure employees could seek care without financial barriers, all while retaining HSA tax advantages.
But that relief has expired. As of January 1, 2025, an HDHP offering first-dollar telehealth coverage no longer qualifies as HSA-compatible. Without amendments to remove this feature, employees under such plans lose HSA eligibility. Worse, any contributions made while ineligible become taxable income, plus a 10% excise tax. For employers who haven’t adjusted their 2025 plan year documents, this is a compliance red flag—and a costly one for employees.
The Stakes for Employers and Employees
HDHPs paired with HSAs remain popular for their cost-sharing structure and tax benefits. In 2025, HDHPs require minimum deductibles of $1,650 (self-only) or $3,300 (family), with out-of-pocket caps at $8,300 and $16,600, respectively. Free telehealth has been a lifeline within this framework, especially for small to mid-sized businesses aiming to support employee health without ballooning premiums. Losing this benefit risks employee dissatisfaction and delayed care, which can drive up long-term costs. The challenge is clear: how can employers preserve free telehealth without sacrificing HSA compatibility?
The Best Path Forward: A Limited Purpose HRA
The legal memo points to a standout solution: a Limited Purpose Health Reimbursement Arrangement (HRA). IRS Publication 969 confirms that while HDHP participants generally can’t have other health coverage, exceptions exist—including for telehealth and remote care. A Limited Purpose HRA fits this exception perfectly. Unlike a general HRA or Health FSA, which could disqualify HSA eligibility by covering broad medical expenses, a Limited Purpose HRA restricts reimbursements to specific services like telehealth, vision, dental, or preventive care—all permissible alongside an HDHP.
Here’s how it works: Employers fund the Limited Purpose HRA to cover 100% of telehealth costs, ensuring employees pay nothing out-of-pocket. The HDHP remains unchanged, meeting deductible requirements for other services, and employees retain HSA eligibility. This approach achieves the goal—free telehealth—with minimal disruption to existing plans. It’s a win-win: employees get seamless access to virtual care, and employers stay compliant with IRS rules.
Why This Matters
For small to mid-sized businesses, this strategy is a lifeline. Telehealth is cost-effective—often cheaper than in-person visits—and vendors offer predictable pricing, like flat per-employee fees. It also meets employee expectations for convenient, modern care, a must in a competitive talent market. Benefits brokers can position this as a proactive fix, blending regulatory savvy with practical value. Plus, it sidesteps the compliance pitfalls of an unamended HDHP, protecting employees from unexpected tax headaches.
Alternative Options
The memo also lists other paths, though they come with trade-offs:
1. Non-HDHP with Embedded Telehealth: Offer a separate, non-HDHP plan with free telehealth. This sacrifices HSA benefits and may increase costs.
2. Ditch the HDHP/HSA Entirely: Switch to a traditional plan with no deductible restrictions. This could raise premiums significantly.
3. Freeze the HSA: Keep the HDHP but stop HSA contributions, offering free telehealth within the plan. This risks IRS scrutiny and loses tax advantages.
4. Discounted Telehealth: Charge a fair market value (FMV) rate for telehealth (e.g., $70 instead of $100), but not zero. This isn’t fully free and requires careful FMV calibration to avoid appearing as first-dollar coverage.
The Limited Purpose HRA stands out for its simplicity and alignment with HSA rules. The alternatives, while viable, either disrupt the HDHP model or fall short of the "free" goal.
Implementing the Solution
Ready to act? Here’s a roadmap:
1. Assess Your HDHP: Confirm it’s updated for 2025, removing first-dollar telehealth if not already done.
2. Set Up a Limited Purpose HRA: Partner with your benefits broker or TPA to design an HRA covering telehealth costs. Fund it to ensure zero employee cost-share.
3. Update Plan Documents: Amend your HDHP and HRA descriptions to reflect this structure, citing IRS Publication 969.
4. Communicate Clearly: Tell employees telehealth remains free via the HRA, and their HSA is safe. Highlight access details.
5. Monitor Costs: Work with a telehealth vendor for predictable pricing, keeping the HRA sustainable.
Looking Ahead
The expiration of first-dollar telehealth relief doesn’t have to derail your benefits strategy. The Limited Purpose HRA leverages IRS exceptions to keep telehealth free, maintaining the HDHP-HSA framework your business relies on. As of March 5, 2025, no legislative extension has emerged, but stay vigilant—retroactive relief could shift the landscape. For now, this approach offers certainty and value.
Small to mid-sized employers can’t always match the resources of larger firms, but they can lead with smart, compliant solutions. The legal memo’s guidance, grounded in IRS rules, empowers you to do just that. Act now to preserve telehealth access, protect HSA eligibility, and reinforce your commitment to employee well-being. Your team—and your bottom line—will feel the difference.
*Note: This reflects guidance as of March 5, 2025. Consult IRS.gov/Pub969 for the latest updates.*
