On January 10, 2022, the U.S. Departments of Labor, Health and Human Services, and the Treasury (together, the "Departments") jointly released a new set of frequently asked questions ("FAQs") primarily intended to address President Biden's December 2, 2021, announcement that individuals may receive health plan reimbursement for the purchase of over-the-counter COVID-19 diagnostic tests ("OTC COVID-19 tests"). The FAQs clarify that health coverage provisions under existing federal legislation related to COVID-19 apply to require first dollar coverage of OTC COVID-19 tests for the duration of the public health emergency, with or without an order or individualized clinical assessment by an attending health care provider.
The updated coverage requirements are effective January 15, 2022, for tests purchased on or after that date. Employers may take advantage of safe harbor guidance in the FAQs to ensure compliance. However, immediate action is required to promptly establish a process to provide coverage of OTC COVID-19 tests and to notify employees of their right to access these tests under their health plan at no cost.
General Coverage Rules for COVID-19 Diagnostic Testing
Under the Families First Coronavirus Response Act ("FFCRA") and the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act"), group health plans (and health insurers) must provide coverage of COVID-19 diagnostic testing without imposing any cost-sharing requirements, prior authorization, or other medical management requirements. The Departments interpret the FFCRA and CARES Act provisions to require this coverage without any out-of-pocket expense to the participant. First dollar coverage of COVID-19 diagnostic testing is required for the duration of the public health emergency under all group health plans except for short-term limited duration coverage, excepted benefits (e.g., dental and vision plans), and retiree-only plans. You can review more information on these requirements generally in our prior alert.
The Departments' previous guidance limited application of this coverage requirement with respect to at-home COVID-19 tests to tests that were ordered by an attending health care provider. Since that time, however, the Food and Drug Administration (FDA) has authorized additional diagnostic tests for COVID-19, including tests that can be self-administered and self-read without the involvement of a health care provider. As a result, the FAQs issued on January 10 clarify that the requirements under the FFCRA and CARES Act apply to OTC COVID-19 tests that meet the statutory criteria under the FFCRA, with or without an order or individualized clinical assessment by an attending health care provider.
Reimbursement for Tests vs. Direct Coverage
Group health plans are permitted to provide coverage of OTC COVID-19 tests by requiring participants to purchase an OTC COVID-19 test and then submit a claim for reimbursement to the plan, in accordance with the plan's reasonable claims procedures. However, to reduce financial barriers to testing and facilitate access, the Departments are strongly encouraging plans to provide direct coverage of OTC COVID-19 tests. Direct coverage means that a participant is not required to seek reimbursement post-purchase. Instead, a plan providing direct coverage of OTC COVID-19 tests must make the systems and technology changes necessary to process the plan's payment to the preferred pharmacy or retailer directly.
To encourage direct coverage arrangements, the FAQs outline a safe harbor under which the Departments will not take enforcement action against a plan that limits reimbursement as follows:
- The plan must arrange for direct coverage of OTC COVID-19 tests through both its pharmacy network and a direct-to-consumer shipping program.
- The plan may then limit reimbursement for OTC COVID-19 tests from non-preferred pharmacies or other retailers to the lesser of the actual price, or $12 per test. If a package contains multiple tests, the $12 limit is multiplied by the number of tests in the package. The plan's lower limit may be more generous, up to the actual cost of the test. (In contrast, if there is no direct coverage arrangement, then the full cost of the test must be covered by the plan.)
- The direct-to-consumer shipping program may be provided through one or more in-network providers or another entity designated by the plan.
- The plan may not impose any prior authorization or other medical management requirements on participants that obtain OTC COVID-19 tests through its direct coverage program or otherwise.
- The plan must take reasonable steps to ensure that its direct coverage program provides participants with adequate access to OTC COVID-19 tests, through an adequate number of retail locations (both in-person and online locations).
- Adequate access requires that plans ensure that participants are aware of key information needed to access OTC COVID-19 tests, such as dates of availability of the direct coverage program and participating retailers or locations.
A plan may not enforce the limitations permitted by the safe harbor during any period in which the plan is unable to meet all of the requirements of the safe harbor. The FAQs provide, as an example, a period in which there are delays in providing OTC COVID-19 tests under a direct-to-consumer shipping program that are significantly longer than the amount of time it takes to provide other items to participants under the program. During this time, employers may not limit the reimbursement of tests purchased outside of the direct coverage program to an amount that is less than the participant's actual cost. As a result, employers (or their vendors) will need to continually monitor whether testing supply shortages impede the plan's ability to impose limitations otherwise permitted by the safe harbor.
Limitation on Number and Frequency of Tests
In addition to the safe harbor for direct coverage arrangements, the FAQs provide that the Departments will not take enforcement action against a plan that limits the number of OTC COVID-19 tests covered for each covered individual to no less than eight tests per 30-day period (or per calendar month). This applies to all coverage (direct coverage or reimbursements). If a package contains multiple tests, plans may count each individual test in the package separately. Plans may not impose a lower number of tests for a shorter period (e.g., four tests per 15-day period), but they may set more generous limits. This limit applies solely to OTC COVID-19 tests that are administered without a provider's involvement or prescription. Tests that are administered with a provider's involvement or prescription may not be limited.
Additional Testing Guidance
The FAQs provide the following additional guidance regarding the coverage of OTC COVID-19 tests:
- Previous guidance clarified that the coverage requirements of the FFCRA and CARES Act do not require plans to provide coverage of testing that is for employment purposes. The FAQs confirm that this limitation continues to apply with respect to the coverage of OTC COVID-19 tests. Therefore, employment related tests are not covered by this guidance.
- A plan may take reasonable steps to ensure that an OTC COVID-19 test was purchased for the individual's own use (or for use by another covered individual), as long as the steps do not create significant barriers to access. The Departments believe that a brief attestation document may be reasonable, but that a requirement to submit multiple documents or that involves numerous steps would unduly delay access to testing and therefore would not be reasonable. A plan may also require reasonable documentation of proof of purchase with a claim for reimbursement for the cost of an OTC COVID-19 test.
- Plans may provide education and information resources to support participants who are seeking OTC COVID-19 tests, as long as the resources make clear that testing is available at no cost and the information is consistent with the test's emergency use authorization.
- Plans must provide coverage in a manner consistent with the FAQs with respect to OTC COVID-19 tests that are purchased on or after January 15, 2022, without an order or individualized clinical assessment by a health care provider. However, plans may voluntarily provide coverage of such tests purchased prior to January 15, 2022.
- Any notice of modification requirements that would otherwise apply to a mid-year change to health coverage does not apply for updates related to coverage of OTC COVID-19 tests.
Employers should confirm that their insurance carriers (for fully insured group health plans) or their third-party administrators and pharmacy benefit managers (for self-insured group health plans) are in a position to comply with the FAQs, and they should also determine whether they are able to establish a direct coverage arrangement for plan participants that meets the requirements of the safe harbor. Coverage changes and information on how to access tests under a direct coverage program, if applicable, should be promptly communicated to covered employees. Finally, employers should consider needed amendments to their plan documents and summary plan descriptions to address these changes.