Update (February 7, 2022)
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Original Publication (January 12, 2022)
On December 2, 2021, President Biden announced new actions to combat COVID-19, given the emergence of the new Omicron variant. As part of his nine-point plan, the President included a directive that “the more than 150 million Americans with private insurance . . . will also be able to get at-home [COVID-19] tests reimbursed by their insurance.” On January 10, 2022, the Departments of Labor, Health and Human Services, and the Treasury (the “Departments”) issued guidance addressing the President’s directive by releasing a set of Frequently Asked Questions (“FAQs”) that clarify that individuals who purchase over-the-counter (“OTC”) COVID-19 tests during the public health emergency will be able to seek reimbursement for the cost of the test from their group health plan or health insurance issuer.
This requirement builds on the provision in the Families First Coronavirus Response Act (“FFCRA”), as amended by the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, which requires that group health plans and issuers cover in vitro diagnostic COVID-19 tests without cost-sharing if they meet certain criteria. Until now, that provision had been understood generally to require group health plans and issuers to cover COVID-19 diagnostic tests only when ordered by a medical provider. Under the new requirement for OTC COVID-19 tests, there will be no required medical provider involvement. In prior guidance, the Departments clarified that this mandate does not encompass tests taken for surveillance or return to work purposes, and that clarification remains unchanged by the new FAQs.
Coverage of OTC COVID-19 Tests
Plans and issuers must cover OTC COVID-19 tests that meet the statutory criteria under the FFCRA and CARES Act, which now includes OTC tests obtained without an order or individualized clinical assessment by a health care provider (superseding the prior guidance that limited coverage to situations in which the at-home test was ordered by a health care provider). The plan or issuer must provide this coverage without imposing any cost-sharing requirements (including deductibles, copayments, and coinsurance), prior authorization, or other medical management requirements.
GROOM INSIGHT: “Cost-sharing” does not include the contributions or premiums paid by an individual for coverage, which means that plans and issuers may take into account the increased costs due to this testing requirement, along with other claims experience, when setting contributions or premiums for future years.
Plans and issuers are not required to cover tests at the point of sale (“direct coverage”) and may instead require that a covered individual pay out-of-pocket and then submit a claim for reimbursement. However, the Departments strongly encourage plans and issuers to provide direct coverage for OTC COVID-19 tests so that covered individuals do not have to pay for such tests upfront. One advantage to a plan or issuer providing direct coverage is that it may limit the dollar amount that it pays for a given OTC COVID-19 test compared to the dollar amount that it reimburses to a participant who paid for the test upfront. If the plan or issuer does not provide direct coverage, such plan or issuer may not limit the reimbursement amount for the test, but rather, must reimburse the actual cost.
GROOM INSIGHT: Presumably, once established, a direct coverage program would result in administrative cost savings in addition to cost savings associated with the cap on reimbursement. However, it may be challenging for plans and issuers to establish this type of program quickly, particularly if the availability of OTC COVID-19 tests continues to be limited.
Limiting Coverage to Preferred Pharmacies or Other Retailers
Plans and issuers cannot limit coverage of OTC COVID-19 tests to only tests that are provided through preferred pharmacies or other retailers. However, if the plan or issuer arranges for direct coverage of OTC COVID-19 tests through both its pharmacy network and a direct-to-consumer shipping program, plans and issuers can limit reimbursement for OTC COVID-19 tests purchased from non-preferred pharmacies or other retailers to the lower of (1) the actual price or (2) $12 per test. This amount applies per test, so if a package includes more than one test, the reimbursement amount is increased (e.g., for a package of two tests, the reimbursement must be the lower of (1) the actual price or (2) $24).
The direct-to-consumer shipping program may be provided through one or more in-network provider(s) or another entity designated by the plan or issuer. Plans and issuers must take reasonable steps to make certain that participants have adequate access to OTC COVID-19 tests by ensuring that tests are available through an adequate number of in-person and online retail locations. What constitutes “adequate” access is not specifically defined in the guidance. Rather, this is a facts and circumstances test that requires analysis of the locality of participants and current utilization of the plan’s or issuer’s pharmacy network. Plans and issuers must also ensure that covered individuals are informed how to access OTC COVID-19 tests, including the date of availability of the direct coverage program and the participating retailers or other locations.
The option to create a point of sale coverage network (and limit the payment of a test purchased outside of the network to the $12 maximum) only applies with respect to OTC COVID-19 tests that are administered without a provider’s involvement or prescription. When a provider is involved, plans and issuers must continue to provide coverage for COVID-19 tests in accordance with prior guidance.
Quantity Limits and the Prevention of Fraud and Abuse
Plans and issuers can limit the number of OTC COVID-19 tests provided pursuant to the FAQs, so long as they cover at least 8 tests per 30-day period (or calendar month) for each covered individual. So, for example, a covered family of four would be able to get up to 32 OTC COVID-19 tests covered by their health plan per 30-day period (or calendar month). In applying this quantity limit, plans and issuers may count each test separately, even if multiple tests are sold in one package. This limit applies solely with respect to coverage of OTC COVID-19 tests that are administered without a provider’s involvement or prescription.
Additionally, plans and issuers may take reasonable steps to prevent, detect, and address fraud and abuse. For example, plans and issuers can require a brief attestation that the test was purchased for the covered individual’s own personal use or that of a covered dependent. Plans and issuers may also require reasonable documentation of proof of purchase of an OTC COVID-19 test, such as the UPC code and/or a receipt from the seller of the test, documenting the date of purchase and the price.
Impact on FSAs, HRAs, and HSAs
Under existing federal tax law, in order for an expense to be reimbursable on a tax-free basis from an FSA, HRA, or HSA, it must not be reimbursed under other coverage. So, if a plan or issuer pays for the OTC COVID-19 test for an individual, his/her FSA or HRA should not also reimburse that expense, and an HSA account owner should not seek a distribution from his/her HSA for that expense (or he/she will be subject to taxes and potential penalties).
GROOM INSIGHT: It will be difficult for an FSA/HRA administrator to determine why a participant is submitting an OTC COVID-19 test expense to the FSA/HRA, and whether the participant received reimbursement for the test through the plan or issuer. Thus, the FSA/HRA administrator should require the participant to certify that another health plan has not paid (and he/she will not seek repayment from another health plan) for the OTC COVID-19 test, just like the administrator does for all other expenses.
The same issue exists for HSAs, but that is not something the administrator needs to worry about because the individual has the responsibility to determine him/herself if a distribution is a non-taxable medical expense. However, the administrator may want to consider reminding HSA account owners of the rule.
It is clear from IRS Notice 2020-15 that a plan or issuer can pay for an OTC COVID-19 test without impacting an individual’s HSA eligibility even if the individual has not satisfied the deductible under the high deductible health plan. Even without that guidance, however, an OTC COVID-19 test would presumably be preventive care under IRS Notice 2004-23 for which the plan could cover before the deductible is satisfied.
Effective Date for OTC COVID-19 Tests
Plans and issuers must provide coverage in accordance with the FAQs for OTC COVID-19 tests purchased on or after January 15, 2022 and during the public health emergency. Practically speaking, this means that plans and issuers have little time to prepare to pay/reimburse the cost of OTC COVID-19 tests.
Coverage of Preventive Services
The FAQs also address questions regarding coverage of colorectal screenings and contraceptive services as preventive services.
On May 18, 2021, the U.S. Preventive Services Task Force (“USPSTF”) released an updated recommendation that all adults aged 45 to 75 years receive regular screenings for colorectal cancer (previously the USPSTF recommended that screenings begin at age 50). Accordingly, such screenings must be covered without cost-sharing in accordance with the requirements of the Affordable Care Act. The USPSTF also noted that a follow-up colonoscopy is needed when stool-based tests or direct visualization reveal abnormal results. Consistent with this note, the Departments clarify that plans and issuers must also cover, without cost-sharing, a colonoscopy conducted after a positive non-invasive stool-based screening test or direct visualization screening test for individuals described in the USPSTF recommendation. Plans and issuers must provide coverage consistent with the updated USPSTF recommendation for plan or policy years beginning on or after May 31, 2022.
The Departments also include a reminder that non-exempt plans and issuers are required to cover, without cost-sharing, all FDA-approved, cleared, or granted contraceptive products that are determined by an individual’s medical provider to be medically appropriate for such individual, regardless of whether such method is specifically identified in the current FDA Birth Control Guide. This comes in response to complaints and public reports of potential violations of existing coverage requirements.