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New Legislation Seeks to Reinstate Telehealth Exception for HDHP Participants

A bill has been introduced in Congress to restore the “telehealth exception” that was in place from 2020 through the end of 2024.

Background

Prior to 2020, High Deductible Health Plan (HDHP) participants who used telehealth services as part of their health coverage were required to pay the fair market value of the telehealth services until their deductible was satisfied. Those who did not were unable to contribute to a health savings account (HSA).

During the COVID-19 pandemic, telehealth services gained significant value as usage skyrocketed. Congress enacted a specific exception in the Internal Revenue Code (IRC), establishing a safe harbor for those HDHP participants who used free telehealth services as part of their health coverage. The safe harbor was extended several times, to ensure that employees’ ability to make HSA contributions will not be compromised by the offering of free telehealth services by their employers. In December of 2024, it appeared that Congress was going to extend the telehealth exception as part of a Continuing Resolution to fund the federal budget. That provision was stripped out of the bipartisan agreement after then-President-elect Trump and Elon Musk criticized other provisions of the bill.

Recent Developments

On February 27, 2025, a group of more than 300 employers, insurance industry professionals, and others sent a letter to the majority and minority leaders in Congress, asking them to restore and make permanent the safe harbor. On the same day, a bipartisan bill was introduced in the House and the Senate ( H.R. 1650 and S. 763). The bill would make the telehealth exception permanent and would be effective for plans beginning on or after January 1, 2025.

We will continue to watch this effort to restore this flexibility for employer plans.