January 12, 2022
Plan sponsors and administrators must act immediately to comply with the over-the-counter COVID test coverage mandate.
On January 10, 2022, the Departments of Treasury, Labor, and Health and Human Services (the Departments) issued frequently asked questions Part 51 (FAQs 51) covering the new mandate that group health plans reimburse participants (generally without cost-sharing) for over-the-counter (OTC) COVID-19 tests purchased without an order or clinical assessment from a healthcare provider. FAQs 51 explains that group health plans must begin complying with the coverage mandate no later than January 15, so plan sponsors and administrators must act immediately.
Following a brief background discussion regarding coverage of COVID-19 testing, we summarize the parameters of the new coverage mandate and highlight some key takeaways/action items for plan sponsors and administrators. Note that FAQs 51 also provide guidance related to coverage of preventive services (colonoscopies and contraceptives), but that guidance is not addressed in this alert.
In March 2020, two legislative pieces were passed that set forth parameters for first-dollar (i.e., no cost-sharing) coverage of COVID-19 testing—the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Collectively, these laws require group health plans to cover without cost-sharing or application of medical management techniques (e.g., prior authorization) certain items and services primarily related to the individualized testing for, or diagnosis of, COVID-19. Such tests and diagnostic services are required to be covered when medically appropriate, as determined by an individual’s healthcare provider. Health plans are not required to cover COVID-19 tests administered for employment-related reasons (e.g., when employees are required to produce a negative test to work onsite). Health plans are also not required to cover COVID-19 tests that do not satisfy the statutory criteria of FFCRA § 6001(a)(1) (i.e., generally, Food and Drug Administration (FDA) authorization).
In June 2020, the Departments issued FAQs 43, which, among other things, requires first-dollar coverage of an OTC COVID-19 test when such test is ordered by a healthcare provider who determined that the test is medically appropriate for the individual.
On December 2, 2021, the Biden administration directed the Departments to issue guidance requiring first-dollar coverage for OTC COVID-19 tests even when a healthcare provider does not order the test or perform a clinical assessment of medical appropriateness.
FAQs 51 provide for the basic coverage requirements for OTC COVID-19 tests purchased or acquired without involvement of a healthcare provider, as well as two safe harbors that allow plan sponsors and administrators to apply limits to the coverage mandate. The basic coverage requirements are as follows:
The basic coverage requirements described above have broad applicability and offer little in the way of cost control/abuse mitigation for plans. Therefore, many plan sponsors and administrators may want to consider the safe harbors below. Plans that use these safe harbors will not face enforcement action from the Departments provided the plans otherwise comply with the coverage mandate.
As noted above, generally, plans must cover the full cost of FDA-authorized OTC COVID-19 tests. To facilitate access to OTC COVID-19 tests and give plan sponsors some ability to control costs of unlimited testing, FAQs 51 authorize plan sponsors and administrators to apply a dollar limit on certain OTC COVID-19 tests purchased by covered individuals provided that certain conditions are met. The Reimbursement Limit Safe Harbor conditions are described below.
The Reimbursement Limit Safe Harbor does not apply to OTC COVID-19 tests that are ordered by a healthcare provider based on a determination of medical appropriateness.
If a plan provides for direct coverage through its pharmacy network and a direct-to-consumer shipping program, the plan can limit the reimbursement from non-preferred pharmacies and other retailers to $12 per test. Note that many OTC COVID-19 testing kits contain two tests, so for those kits, the reimbursement limit is $24 (i.e., $12 per test). If a plan is not able to satisfy the requirements of the Reimbursement Limit Safe Harbor, the plan must cover all OTC COVID-19 tests without any limit on the reimbursement.
To address concerns regarding potential abuse of the OTC COVID-19 test mandate and to ensure that individuals who need tests have access to them, FAQs 51 provide for a Quantity/Frequency Limit Safe Harbor. Key components of this safe harbor are described below.
The Quantity/Frequency Limit Safe Harbor does not apply to OTC COVID-19 tests that are ordered by a healthcare provider based on a determination of medical appropriateness.
In FAQs 51, the Departments encourage robust communications to ensure that covered individuals are adequately informed about the OTC COVID-19 test coverage parameters. For example, plan sponsors and administrators should consider informing covered individuals of the following:
Without a doubt, the new OTC COVID-19 test coverage mandate increases overall group health plan spend and makes administration more difficult. Nevertheless, plans must be ready to comply by January 15. With that in mind, plan sponsors and administrators should note the following:
Note that the OTC COVID-19 testing coverage mandate will remain in place for the duration of the public health emergency, as determined by the Secretary of the Department of Health and Human Services. The public health emergency has been in place since January 27, 2020 and will likely continue for the foreseeable future.
The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.
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