Employer Plans Must Pay For Over-the-Counter COVID Tests

Davis Wright Tremaine LLP

Davis Wright Tremaine LLP

Effective January 15, 2022, employer group health plans must pay for at-home COVID-19 diagnostic tests purchased during the public health emergency. Given that the requirement to cover over-the-counter (OTC) COVID-19 tests is already in effect (and was issued without much notice), employers should work with their third-party administrators and insurers to ensure their plan's claims and reimbursement systems are set up to provide the necessary coverage as soon as possible (we include a list of action items below for employers with fully insured and self-insured plans).

The U.S. Departments of Labor, Health and Human Services, and Treasury have issued joint guidance in the form of frequently asked questions (FAQs) regarding coverage of at-home COVID-19 tests at no cost to participants with or without an order from a healthcare provider.

Coverage of OTC Tests

The regulating agencies had issued guidance in June 2020 interpreting pandemic-era federal legislation—the Families First Coronavirus Response Act (FFCRA) and Coronavirus Aid, Relief, and Economic Security (CARES) Act—to require coverage of FDA-approved at-home COVID-19 testing only when the test was ordered by a healthcare provider after an individualized clinical assessment (see our blog post summarizing the prior interpretation and agency guidance).

Since that time, the FDA has authorized the use of additional COVID-19 diagnostic tests that can be self-administered and self-read at home without the involvement of a healthcare provider. This new agency guidance requires health plans to cover OTC at-home COVID-19 tests that satisfy the statutory criteria under the FFCRA and CARES Act irrespective of whether the tests have been ordered by a healthcare provider. It is effective for tests purchased on or after January 15, 2022, during the COVID-19 public health emergency.

Employer plans must cover at-home OTC COVID-19 tests without prior authorization or medical management requirements. In addition, except as explained in the next section, these tests must also be covered without any out-of-pocket costs to participants.

Imposing Network and Reimbursement Limits

The new guidance encourages, but does not require, plans and insurers to provide "direct coverage" for OTC tests at the point-of-sale by reimbursing vendors directly and without requiring participants to submit claims for reimbursement.

In addition, although a plan cannot limit coverage to their preferred pharmacies or retailers, it can limit reimbursement for tests purchased at non-preferred pharmacies or other retailers to the lesser of: (1) the actual price per test; or (2) $12 per test (for multipacks, reimbursement remains $12 for each test within the pack) if it follows the "safe harbor" requirements below. Following the safe harbor will also result in no enforcement action being taken against a plan for its coverage of OTC tests.

The safe harbor requirements are as follows:

  • The plan must provide "direct coverage" for tests through both its preferred pharmacy network and a direct-to-consumer shipping program. "Direct coverage" means that a participant is not required to seek reimbursement post-purchase, because the plan makes available systems for direct processing without any upfront cost to the participant;
  • The direct-to-consumer shipping program may be provided through one or more in-network provider(s) or another entity designated by the plan; and
  • The plan must ensure that participants have adequate access to OTC tests through its direct coverage program (i.e., through an adequate number of in-person and online sources).

The guidance explains that "adequate access" should be determined based on all relevant facts and circumstances—such as the locality of participants and current utilization of the plan's pharmacy network by participants—and reminds employers that plan participants should be made aware of key information needed to access COVID-19 testing, such as dates of availability of the direct coverage program and participating retailers or other locations.

If the safe harbor requirements are not met (e.g., there are delays significantly longer than for other items available through the direct-to-consumer shipping program), the plan must pay the full cost of the tests, including those purchased from non-preferred pharmacies or retailers.

The guidance confirms this safe harbor only applies to COVID-19 tests administered without a healthcare provider's involvement—those tests ordered by a provider must continue to be covered as required under federal law.

Quantity Limits and Measures to Prevent Fraud and Abuse

A plan may limit the number of OTC tests it pays for during the public health emergency to no fewer than eight tests per 30-day period. If tests are sold in multiples, the plan can count each test separately. However, plans cannot impose a limit of a smaller number of tests over a shorter period (e.g., four tests per 15-day period). These limits only apply to OTC tests—there is no limit to COVID-19 tests ordered by healthcare providers.

The guidance also acknowledges that plans can act to prevent, detect, and address fraud and abuse with respect to the purchase of OTC tests, provided these measures do not create significant barriers for individuals to obtain the tests. This may include:

  • Prohibiting coverage of OTC tests for uses other than an individual's personal use, such as by requiring attestation from the participant; or
  • Requiring reasonable documentation of proof of purchase (such as the UPC code and/or receipt from the vendor documenting the date of purchase and price) with a claim for reimbursement for the cost of OTC tests.

The guidance also clarifies that plans are not required to provide coverage for OTC tests purchased for employment purposes (e.g., return to work testing).

Action Items

For employers with fully insured plans:

  • Check with your insurance carrier to ensure that:
    • Pharmacy and retailer networks, and if applicable, a direct-to-consumer shipping program are in place; and
    • Appropriate claims and reimbursement systems are in place (including to support direct coverage at point-of-sale, if applicable).
  • Obtain details from your insurance carrier regarding any purchase limits and/or reimbursement limits for tests purchased at non-preferred pharmacies or retailers.
  • Alert plan participants of the following:
    • OTC COVID-19 tests are covered without health care provider involvement.
    • The claims and reimbursement process.
    • Information about network of preferred and non-preferred pharmacies/retailers and direct-to-consumer shipping program (if applicable).
    • Any purchase and/or reimbursement limits.

For employers with self-insured plans:

  • Consult with your third-party administrator or other service provider(s) about the following:
    • Network coverage:
      • Making OTC COVID-19 tests available through a network of pharmacies and other retailers, and whether there is a network of preferred pharmacies and retailers.
      • Making tests available through a direct-to-consumer shipping program, if applicable.
    • Setting purchase and/or reimbursement limits (for tests purchased at non-preferred pharmacies or retailers).
    • Ensuring claims and reimbursement systems are in place (including to support direct coverage at point-of-sale, if applicable).
  • Alert plan participants of the following:
    • OTC COVID-19 tests are covered without healthcare provider involvement.
    • The claims and reimbursement process.
    • Information about network of preferred and non-preferred pharmacies/retailers and direct-to-consumer shipping program (if applicable).
    • Any purchase and/or reimbursement limits.

Please contact your DWT attorney for more information.

The facts, laws, and regulations regarding COVID-19 are developing rapidly. Since the date of publication, there may be new or additional information not referenced in this advisory. Please consult with your legal counsel for guidance.

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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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