Update! Departments Issue More Guidance Addressing Coverage Of Over-the-Counter COVID-19 Tests – Food, Drugs, Healthcare, Life Sciences – United States – Mondaq News Alerts
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 (“first FAQs”) that require coverage for
over-the-counter (“OTC”) COVID-19 tests during the public
health emergency by either direct coverage or reimbursement for the
cost of the test from a group health plan or health insurance
issuer. Most recently, on February 4, 2022, the Departments issued
an additional set of FAQs (“second
FAQs “) that modifies and clarifies certain aspects of the
first FAQs. Below, we have updated our original alert to reflect the
second FAQs.
The requirement that group health plans and health insurance
issuers cover the cost of OTC COVID-19 tests 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. Prior to
the issuance of the first FAQs, 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 is 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 as outlined in
the first and second FAQs, including OTC tests obtained
without an order or individualized clinical
assessment by a health care provider (superseding 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 OTC COVID-19 test coverage 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.
Plans and issuers that do so, and otherwise meet a specific
“safe harbor” enumerated in the first FAQs, may limit the
dollar amount that they pay for a given OTC COVID-19 test (subject
to specific rules outlined below) compared to the dollar amount
that they reimburse 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.
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, the first FAQs provided a “safe
harbor” under which, 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).
A direct-to-consumer shipping mechanism is any program that
provides direct coverage of OTC COVID-19 tests without requiring
the covered individual to obtain the test in-person, including
online or telephone ordering. It can be provided through a pharmacy
or other retailer, the plan or issuer directly, or any other
entity, and plans and issuers do not have to provide exclusive
access through one entity so long as they allow a covered
individual to have the tests shipped to him/her directly.
New! The second FAQs state that plans and
issuers “have significant flexibility in how they provide
access to OTC COVID-19 tests” and “must provide direct
coverage by ensuring participants, beneficiaries, and enrollees
have adequate access to OTC COVID-19 tests with no upfront
out-of-pocket expenditures.” Whether a plan or issuer provides
“direct coverage” still depends on the facts and
circumstances and “will generally require that OTC COVID-19
tests are made available through at least one direct-to-consumer
shipping mechanism and at least one in-person mechanism.”
GROOM INSIGHT: Many plans and issuers were not able to have a
direct-to-consumer shipping program up and running with such short
notice. A footnote in the second FAQs gives possible limited relief
while programs are getting started – the footnote states that the
Departments recognize that there may be some limited circumstances
in which a direct coverage program could provide adequate access
without establishing both a direct-to-consumer shipping program and
an in-person mechanism. For example, where a small employer’s
plan covers only employees who live and work in a localized area,
it could be possible that distribution at a nearby location
constitutes adequate access without establishing a
direct-to-consumer shipping mechanism. It is not clear whether this
exception would also apply to large employers and, if so, under
what circumstances a large employer’s distribution would
constitute adequate access without a direct-to-consumer shipping
program.
New! The second FAQs clarify that when
providing OTC COVID-19 tests through a direct-to-consumer shipping
program, plans and issuers must cover reasonable shipping costs
related to covered OTC COVID-19 tests in a manner consistent with
other items or products provided by the plan or issuer via mail
order. However, a plan or issuer that meets the requirements of the
safe harbor may continue to limit reimbursement to $12 per test (or
the full cost of the test, if lower) for OTC COVID-19 tests
purchased outside of the direct coverage program, and the guidance
clarifies that the $12 maximum reimbursement limit includes
shipping and sales tax costs.
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 was not specifically defined in the
first FAQs other than that the Departments would consider 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.
New! The second FAQs detail how plans and
issuers can provide direct coverage and direct-to-consumer shipping
programs. For example, plans and issuers can provide direct
coverage of OTC COVID-19 tests through a number of mechanisms
including: (1) a direct-to-consumer shipping program that allows
for orders to be placed online or by telephone, (2) the plan’s
or issuer’s pharmacy network, (3) other non-pharmacy retailers,
and (4) alternative OTC COVID-19 test distribution sites
established by (or on behalf of) the plan or issuer. Plans and
issuers should inform covered individuals about whether the type of
test available to covered individuals varies based on the coverage
mechanism utilized.
New! The Departments note that they may
request information from plans and issuers, such as the number and
location of in-person options, to ensure that covered individuals
have adequate access to OTC COVID-19 tests.
New! The second FAQs clarify that adequate
access under the safe harbor does not mean a plan or issuer has to
make all OTC COVID-19 tests that meet the statutory criteria under
the FFCRA and CARES Act available through the direct coverage
program. For example, a plan or issuer could cover tests from a
limited number of manufacturers (such as those with whom the plan
or issuer has a contractual relationship) if that would provide
adequate access based on the facts and circumstances.
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.
New! Difficulties Related to Supply Shortages
The second FAQs provide that if a plan or issuer is unable to
temporarily provide adequate access through a direct coverage
program due to supply shortage, but has otherwise established a
compliant direct coverage program, such plan or issuer will not be
out of compliance with the direct coverage safe harbor. If this
happens, the plan or issuer can limit reimbursement of tests
purchased outside of the direct coverage program to $12 per
test.
GROOM INSIGHT: This has been a significant concern for plans
and issuers because OTC COVID-19 tests continue to be in short
supply.
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.
New! The second FAQs note that plans and
issuers can establish a policy that limits coverage of OTC COVID-19
tests purchased without the involvement of a provider to tests
purchased from established retailers that would typically be
expected to sell OTC COVID-19 tests. Specifically, plans and
issuers do not have to reimburse OTC COVID-19 tests that a covered
individual purchases from a private individual (either in person or
online) or a seller that uses an online auction or resale
marketplace. If a plan or issuer implements such a restriction, it
should provide covered individuals with information regarding the
retailers from which it will generally reimburse the cost of OTC
COVID-19 tests and those that retailers or individuals that will
not be covered under its OTC COVID-19 test reimbursement program.
The second FAQs also permit a plan or issuer to limit coverage
where the cost is reimbursed from another source, such as through
an FSA or HRA (see below) – or if re-sold by the participant. So
the plan or issuer could prohibit participants from receiving
plan-covered OTC tests and then re-selling them.
GROOM INSIGHT: This is an important clarification, particularly
for plans and issuers that do not implement the direct coverage
option, because this allows a plan and issuer to limit its
reimbursement of OTC COVID-19 tests to established retailers, which
should help minimize financial exposure for price gouging or other
excessive pricing strategies by resellers.
New! Coverage of Tests That Require Laboratory or Provider
Involvement
The second FAQs note that the guidance under the first FAQs
applies to OTC COVID-19 tests that are approved, cleared, or
authorized for use by the Food and Drug Administration and that can
be obtained without a prescription. The second FAQs specify that
this means tests that are completely used and processed without the
involvement of a laboratory or other health care provider. If an
OTC COVID-19 test is not approved to be self-administered
and self-read, the guidance in the OTC COVID-19 FAQs does
not apply. However, provisions under the FFCRA, CARES Act, and
prior guidance may still apply to such test.
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).
New! The first FAQs did not address the impact
of the guidance on FSAs, HRAs, or HSAs, but second FAQs do.
Specifically, the Departments note that the cost of an OTC COVID-19
test is a medical expense that generally could be reimbursed by an
FSA or HRA; however, since an individual cannot be reimbursed more
than once for the same medical expense, tests reimbursed by a plan
or issuer cannot be reimbursed by an FSA or HRA. Similarly, such
expenses are not qualified medical expenses for purposes of
distributions from an individual’s HSA if reimbursed by a plan
or issuer. The Departments suggest that plans and issuers advise
covered individuals not to seek reimbursement from their FSA or HRA
for the cost of OTC COVID-19 tests that are paid for or reimbursed
by the plan or issuer. If an individual mistakenly receives
reimbursement from an FSA or HRA for a test already covered by the
plan’s or issuer’s reimbursement program, the individual
should contact the account administrator regarding correction
procedures. If an individual mistakenly takes a distribution from
an HSA for a test already covered by the plan’s or issuer’s
reimbursement program, the individual must either (1) include the
distribution in gross income, or (2) if and as permitted under
existing guidance, repay the distribution to the HSA.
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.
New! The guidance under the second FAQs
regarding the flexibility in creating direct-to-consumer shipping
and direct coverage in-person programs applies prospectively and is
effective beginning February 4, 2022.
Coverage of Preventive Services
The first 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.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
