How the CARES Act could shape benefits over the coming year

The novel coronavirus has completely transformed everyday life. It has shaken markets around the globe and prevented us from supporting local business, causing a historic spike in unemployment. It has jeopardized the health and well-being of our communities and without a vaccine, cure, or firm reopening of the United States economy in sight, many are bracing for prolonged negative economic growth. Especially in a pandemic, the downturn draws attention to health savings and the insurance landscape in the United States.

To buttress the economy and make access to coronavirus testing more affordable, the United States Congress passed the Coronavirus Aid, Relief and Economic Security Act (CARES Act). CARES guarantees reimbursement for any FDA approved coronavirus test and stipulates a number of other relief efforts including stimulus checks (many of which have already arrived in bank accounts) and small business and economic disaster loans. And the work is not done.

Further governmental response has come in the form of state action. Nearly all 50 states had issued stay-at-home orders and for the first time in American history, all 50 have simultaneous disaster declarations, thereby releasing emergency funds.

Coronavirus and the subsequent institutional reactions have had and will have a profound impact on the way businesses manage their employees. HR and benefits professionals need to make sure their people are adequately covered, and that they’re looking to a short and long term significantly influenced by COVID-19.

Consumer-directed health care during pandemic

Specifically for consumer-directed health care (CDH), which we believe was trending up prior to the crisis, the CARES Act outlines eligibility for HSAs, FSAs, and HRAs to expense over-the-counter medicines and menstrual care products. This adds flexibility for the consumer and stretches the applications of insurance dollars.

Coverage has also been extended to telehealth services for HSA-qualified HDHPs through December 31, 2021. Employees might turn to such plans, depending on their need, over the coming year or two as the CARES Act enables spending on quarantine critical goods and services.

For Health Savings Accounts (HSAs) in particular, we see a more positive environment. Prior to the CARES Act, HSA-qualified HDHPs might not have provided non-preventative coverage until the statutory minimum deductible was satisfied. That is no longer the case for COVID-19 testing and treatment. And thanks to the federal tax deadline extension, contributions to a 2019 HSA are possible through July 15, 2020. This means folks can build a better safety net for future medical costs even into retirement.

People who maintain Flexible Spending Accounts (FSAs) also have some help. If an FSA owner is furloughed or experiences a reduction of hours and loss of coverage, COBRA kicks in, allowing for an employee to keep their insurance despite the lack of employment.

Macro trends

Per the 2017 Centers for Medicare and Medicare Services data, health care comprised 18% of U.S. GDP, costing $10,739 annually per person. That cost was fairly split between the federal government (28.1%), households (28%), private business (19.9%), state and local government (17.1%), and other sources (6.8%). Health care is a varied and dynamic sector, and massive unemployment numbers, the CARES stimulus package, and coronavirus itself will no doubt play a large role in shaping it over the coming decade.

In the short term, volatility will rule. We are witnessing a huge need for care for those fallen ill, but limited to no demand for other health services. Elective surgeries, for example, are canceled until further notice. Once a reopening occurs, though, we shouldn’t be surprised to see hesitancy in returning to doctor’s offices or a future wave which pumps the brakes. In tandem with the drawdown at large, expect a health care market slowdown in the immediate future.

That being said, the CDH outlook over the long run remains strong. The CARES Act buoys employee demand for various health care plans and extends a hand to those in need. Once we emerge from the pandemic, many folks are going to apply a scrupulous eye to their insurance plans, so employers will need to be prepared with a robust and differentiating offer.

So, right now, we recommend that companies maintain their benefits structure as much and for as long as possible. Change to benefits can add undue stress, and adversely affect sentiment in the long run. HR and benefits pros should do whatever possible to familiarize themselves with the personal and economic needs of their workforce and craft a strategy tailor made to their employees. We can all help carry each other through these difficult times, and employer benefits are an important piece to creating normal.

Chad Wilkins serves as an Executive Vice President of Webster Bank and President of HSA Bank where he is responsible for leading the organization and its people toward sustainable growth well into the future. Chad joined HSA Bank in 2014, bringing with him more than 25 years of experience in the banking and health insurance industries. Chad has a consistent history of achievement in sales leadership, relationship management, product management, P&L leadership, and employee engagement throughout his roles as President of The Wilkins Group, his own consulting practice specializing in healthcare and financial services, Chief Executive Officer of Optum Health Financial Services, and Senior Vice President, Commercial Large Markets at US Bank.