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February 8, 2022

New required health plan coverage for over-the-counter COVID-19 tests

Chris Beinecke

Federal agencies release guidance expanding health plan coverage for COVID-19 testing

On December 2, 2021, the Biden Administration published an action plan outlining additional steps it intends to take to fight the COVID-19 pandemic. The action plan included a requirement for health plans to provide coverage for free at-home over-the-counter (OTC) COVID-19 tests. The action plan provided almost no detail about how this would work and directed the U.S. Departments of Labor, Health & Human Services (HHS), and Treasury (collectively, the “Agencies”) to issue guidance addressing this by January 15, 2022.

The Agencies published this guidance in the form of initial frequently asked questions on January 10, 2022 and a set of follow-up frequently asked questions on February 4, 2022 (collectively, the “FAQs”). This Alert addresses the FAQs as they relate to employer-provided group health coverage.[1] The Biden Administration’s action plan calls for separate initiatives to expand testing opportunities for the uninsured and for Medicare beneficiaries.

Effective date

The action plan specified a due date for the Agencies to publish guidance, but it did not specify an effective date. The FAQs indicate an effective date of January 15, 2022, except where noted below. The coverage requirement lasts for the duration of the COVID-19 Public Health Emergency (PHE) set by HHS. The current PHE is set to expire on January 16, 2022, but HHS can extend this for 90-day periods, and we expect it will do so at least once more through April 16, 2022 (likely by the time you read this).[2] Group health plans may choose to continue coverage beyond the PHE.

In most instances, administration for the new OTC COVID-19 testing coverage requirement will fall to the group health plan’s insurance carrier or third party administrator (TPA). The FAQs allow some limited flexibility for the reimbursement process to evolve over time, if necessary.

Coverage for OTC COVID-19 testing

As of January 15, 2022, health plans must generally cover OTC COVID-19 tests without an order from an attending health care provider for testing and without any cost sharing (i.e. covered at 100%), prior authorization, or medical management requirements such as limiting coverage to in-network or other preferred distribution channels. This applies only to OTC COVID-19 tests approved for use under one or more of the following categories:

  1. All testing approved by the Food & Drug Administration (FDA);
  2. Non-FDA approved testing under an emergency use authorization request unless denied or the test developer fails to timely file the request with the FDA;
  3. State-approved testing when the state has notified HHS of its intent to use the test; and
  4. Other tests approved by HHS.

For the purposes of this coverage mandate, a covered OTC COVID-19 test is a test that is self-administered and self-read by the participant and does not involve a laboratory or health care provider to analyze the result. The CARES Act mandate may apply to tests requiring laboratory or testing facility support if ordered by a health care provider.

The OTC COVID-19 test coverage mandate primarily applies to fully insured and self-insured medical plans, and there is no exception for grandfathered plans under the Affordable Care Act. A direct coverage safe harbor somewhat relaxes the requirement to cover OTC COVID-19 tests without cost sharing and the limitation on the ability to control the distribution channels.

Interestingly, the coverage requirement does not apply to testing required for employment purposes. This means the FAQs do not require a health plan to pay for mandatory workplace surveillance testing, return-to-work testing, or testing as an alternative to a vaccination requirement (please see No employer relief). The FAQs state the following in FAQ #1 at the top of page 5 (bolded text is for emphasis):

This FAQ does not modify previous guidance addressing coverage for purposes not primarily intended for individualized diagnosis or treatment of COVID-19, including the guidance that states that plans and issuers are not required to provide coverage of testing (including an OTC COVID-19 test) that is for employment purposes.

Please note that applicable state and/or local law might require an employer to pay for employment-based testing. 

CARES Act: The earlier CARES Act testing mandate and related guidance requiring coverage for COVID-19 testing ordered by an attending health care provider without cost sharing is still in effect. The CARES Act mandate may apply to testing not covered by the FAQs, such as testing services that are not available OTC and/or require a prescription or health care provider’s order or that exceeds the allowable limit under the FAQs.

Claims payment methods

Health plans may adopt one or both of the following claims payment methods:

  1. Require the participant to pay for the cost of the testing out-of-pocket and submit a claim for reimbursement from the plan; and/or
  2. The plan may reimburse the seller directly (the FAQs refer to this as “direct coverage”).

A plan may require a participant to provide a receipt or other reasonable substantiation when submitting a claim for reimbursement. A medical plan can provide this as a tax-free cash reimbursement directly to the participant.

Direct coverage generally requires the seller to be able to process the transaction using the participant’s insurance information, generally limiting direct coverage to pharmacies and other entities capable of processing point-of-sale insurance transactions (these claims should auto-adjudicate). Plans may also satisfy the direct coverage requirement by distributing manufacturer’s or similar coupons that participants may use to purchase tests at no cost.

The Agencies strongly encourage health plans to administer direct coverage where feasible and provided an incentive through the direct coverage safe harbor, but the FAQs do not require this. Health plans may need to administer the participant reimbursement method for a period of time until the direct coverage method is set up and available.

No employer relief

Although the FAQs do not require health plans to pay for OTC COVID-19 tests for employment purposes,[3] employers sponsoring self-insured medical plans generally have the flexibility to determine what their plans will cover and may choose to cover employment-based testing (this likely requires modification of any medically necessary rule). By contrast, we expect resistance from insurance carriers to the extent it is feasible to do so.[4]

The FAQs also do not include any mechanism for employers to recover the cost of tests purchased for and distributed to employees. Employers may be able to take a tax deduction for this as a business expense.

Direct coverage safe harbor

If a health plan provides authorized OTC COVID-19 tests at no cost through both in-person and direct-to-consumer shipping distribution channels,[5] the health plan can limit its required reimbursement for tests purchased outside those distribution channels to the lesser of:

  • The actual cost; or
  • $12 per test (including $12 for each test in a package if sold together).

If a health plan satisfies this safe harbor, it does not have to pay for the cost of tests purchased out-of-network in excess of $12 per test, and any remaining amount can be an out-of-pocket expense for the participant. Participants may seek reimbursement for any remaining out-of-pocket expenses from their general purpose health FSA, general purpose HRA, or HSA, if any, but not for any amount reimbursed by the health plan.

The safe harbor protects the plan from out-of-network price gouging, and we expect most employer-provided health plans will be able to qualify. It includes a network adequacy provision for reasonable access to and delivery of tests based on all relevant facts and circumstances. For example, one or two in-network pharmacy locations may be reasonable for a lightly populated area but insufficient for a heavily populated one. The Agencies will consider the current supply chain shortage when evaluating reasonable access and delivery.

Applicable as of February 4, 2022

The follow-up FAQs provide some clarity and examples for the in-person and direct-to-consumer distribution channels. This guidance is not binding prior to February 4th.

  • In-person – To qualify for the direct coverage safe harbor, the plan must provide adequate access to enable participants to obtain tests in-person without cost sharing. Examples include in-network pharmacies, specified retailers, and drive-through and/or walk-up distribution centers.
  • Direct-to-consumer – Direct-to-consumer means a distribution channel or channels enabling participants to obtain tests remotely with no in-person encounter without cost sharing, such as through an online and/or telephone ordering system. Examples include an in-network pharmacy mail order program or specified retailers that will ship tests directly to a participant’s residence.

Shipping costs: The FAQs indicate the plan must pay any “reasonable” shipping costs. The FAQs do not define or provide any example for reasonable shipping costs, leaving this as a subjective standard.

The same entity can serve as both an in-person and direct-to-consumer distribution channel. For example, a plan’s pharmacy benefit manager may operate both an online mail order program and retail pharmacies. If availability differs, plans must communicate which tests are available through the various distribution channels.

Fraud & abuse protection

A health plan may limit coverage to 8 OTC COVID-19 tests in a 30-day period (or per calendar month at the plan’s option) for each covered participant, which includes a covered spouse and any covered dependents. A health plan may count each test in a package toward this limit, but the 8-test limit applies separately to each covered family member. An employee and spouse must be able to receive at least 8 tests each (16 total) without cost sharing in a 30-day/1 calendar month period.

Plans cannot pro-rate this 8-count limit to shorter periods, such as limiting coverage to 2 tests per week. Remember that the CARES Act testing mandate still applies, so a plan must continue to cover additional tests if ordered by a health care provider, although these may not be OTC tests. As indicated earlier, health plans may require reasonable substantiation before paying claims.

Health plans may also require participants to certify that the tests are for personal use only, not for employment purposes, not for resale, and not reimbursable through other means. This is an honor code system similar to other attestations and difficult for an employer or insurance carrier/TPA to police. A health plan cannot require participants to certify that the test is for any immediate medical need. Plans may also limit reimbursement to purchases made through established retailers and require receipts or other proof of purchase to exclude third party resellers.

Communications and next steps

Employers – likely in conjunction with their insurance brokers/consultants – should coordinate with their insurance carriers and/or TPAs to determine support capabilities and timing. This will include whether the health plan(s) will support one or both methods of claims payment. The Agencies did not provide a model notice or communication with the FAQs, although the Centers for Medicare and Medicaid (part of HHS) did release an information statement to the public. We expect the insurance carriers/TPAs will provide some sort of information about the change in coverage of OTC COVID-19 tests to share with participants in many cases.

The FAQs support and encourage providing participants with educational information about authorized COVID-19 tests, where to find them, how to use them, the reliability of OTC COVID-19 testing results, how the health plan will pay for them, and the availability of COVID-19 testing by trained providers. For example, if a participant pays for a test at a grocery store’s in-store pharmacy counter, the test may be payable through direct coverage with no participant out-of-pocket expense. By contrast, if the participant pays for the test at the grocery store’s checkout counter, the participant will likely have to pay up front for the test and submit a claim for reimbursement to the plan.

The FAQs are very generous with respect to amending plan materials and waive the 60-day prior material modification rule for a health plan’s summary of benefits and coverage. Since this is an addition to coverage, employers have considerable time to amend or update their other plan materials. We understand employers may be reluctant to adopt amendments for what may be very temporary changes to their plans and recommend employers discuss this with their legal counsel.

[1] The FAQs also include an unrelated expansion of the existing coverage for colonoscopies as a preventive service under the Affordable Care Act for non-grandfathered health plan years beginning on or after June 1, 2022, and an announcement of a review and enforcement initiative with respect to coverage for required contraceptive services.

[2] HHS has already extended the PHE seven times. Given the current state of the COVID-19 pandemic in the United States, we expect HHS will extend again into July 2022.

[3] The CARES Act does not require health plans to pay for tests for employment purposes either.

[4] Although surveillance testing or testing in lieu of vaccination may be easy to identify, return-to-work testing might not.

[5] The Agencies recognize there may be instances where it may not be necessary to provide both an in-person and direct-to-consumer channel to provide sufficient access in a particular geographic location and qualify for the safe harbor. For example, providing access only to a physical in-person location or through a direct-to-consumer channel may be sufficient in certain remote locations.

The information contained herein is for general informational purposes only and does not constitute legal or tax advice regarding any specific situation. Any statements made are based solely on our experience as consultants. Marsh McLennan Agency LLC shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. The information provided in this alert is not intended to be, and shall not be construed to be, either the provision of legal advice or an offer to provide legal services, nor does it necessarily reflect the opinions of the agency, our lawyers or our clients. This is not legal advice. No client-lawyer relationship between you and our lawyers is or may be created by your use of this information. Rather, the content is intended as a general overview of the subject matter covered. This agency is not obligated to provide updates on the information presented herein. Those reading this alert are encouraged to seek direct counsel on legal questions. © 2021 Marsh McLennan Agency LLC. All Rights Reserved