CARES Act – Group Health Plans and a Little Déjà vu to 2011

Nelson Mullins Riley & Scarborough LLP
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Nelson Mullins Riley & Scarborough LLP

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act), enacted on March 27, 2020, affects employer group health plans with

  • some extensions to provisions in the Families First Coronavirus Response Act (“FFCRA”),
  • a return to coverage for over-the-counter (OTC) medications under accounts such as HSAs and health FSAs, and
  • direction for HIPAA guidance to be issued.

FFCRA Extensions – Tests and Pricing

The CARES Act expands the diagnostic tests for SARS-CoV-2 or coronavirus disease 2019 (collectively referred to in this Alert as “COVID-19”) which are covered and paid without co-pay, deductible or coinsurance. In FFCRA, the diagnostic testing was defined as in vitro diagnostic testing approved, cleared or authorized by the FDA. The CARES Act expands two type of tests:

(1) those where the test developer has not yet had the FDA emergency use application approved (but has applied or does so within a reasonable time and has not been denied) and

(2) tests developed and authorized by States.

This reflects the expanding work on COVID-19 testing and the need to increase testing availability and the assurance that the cost of diagnostic testing will be covered by group health plans.

The CARES Act begins to address the pricing for COVID-19 diagnostic testing. It requires the test providers to post on a public internet website the “cash price” of COVID-19 tests.  Group health plans and health insurers must reimburse the COVID-19 diagnostic testing provider at the published cash price or under the pricing negotiated between the plan/insurer and provider in effect before the declaration of the public health emergency on March 13, 2020. In the absence of such prior agreement, plans and insurers can negotiate reimbursement rates less than the publicly posted cash price. The Secretary of Health and Human Services (“HHS”) can impose a $300/day penalty on diagnostic testing providers for noncompliance with posting of cash prices. This gives group health plans and insurers some transparency of diagnostic testing cost and thus some leverage in negotiation of discounted rates. It will be important to ask any diagnostic testing provider to identify the public website used to post their cost.

Group health plans and health insurers for group and individual coverage must offer “qualifying coronavirus preventive services” without cost-sharing within 15 days after the service is properly recommended. These services are items, services or immunizations that are intended to prevent or mitigate COVID-19. To be such a service, the service must be an evidence-based item or service with an “A” or “B” rating by the United States Preventive Service Task Force which publishes its recommendations here. Immunizations must be under the recommendations of the Advisory Committee on Immunization Practices of the CDC (see https://www.immunize.org/acip/). This provision of the CARES Act anticipates development of vaccines and other mitigating treatments to be covered similar to other preventive services and immunizations now covered by such plans.

Account Plans – Expanded Coverage

The CARES Act expands features of HSAs, Archer MSAa, health FSAs and HRAs (“account plans”) to make reimbursements or payments for workers easier and on a pre-tax basis.

The CARES Act removes the requirement that a “qualified medical expense” that is reimbursed through account plans must have a prescription. This returns these accounts to the pre-2011 status where over-the-counter (OTC) medications, such as aspirin, ibuprofen, or cough medicine, can be reimbursed through these accounts on a pre-tax basis. The CARES Act adds “menstrual care products” to the OTC medical reimbursable from these accounts. These changes apply to expenses paid from an account or incurred after December 31, 2019. This change has no sunset in the CARES Act and appears to be permanent.

The CARES Act allows high deductible health plans (HDHP) to pay for telehealth and other remote services without requiring the participant to first meet the deductible. Thus, these costs can be reimbursed by HSAs. This applies to plan years beginning before December 31, 2021; for calendar year plans, that means for 2020 and 2021. This is not a permanent change but only intended to accommodate the current public health emergency.

HIPAA Privacy Direction

The CARES Act directs the Secretary of HHS to issue guidance within 180 days on treatment of protected health information (PHI) under the HIPAA privacy and security regulations during the COVID-19 public health emergency.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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