Group Health Plans Must Provide Free Over-the-Counter COVID-19 Tests Effective January 15, 2022 – Six Takeaways

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On January 10, 2022 the Departments of Labor, Health and Human Services, and Treasury (collectively the “Departments”) issued Affordable Care Act FAQs Part 51 which addresses, in relevant part, payment for over-the-counter (“OTC”) COVID-19 testing. Below are six important takeaways from that guidance.

Action Item(s): Plan sponsors should consider confirming that their pharmacy benefit managers (PBMs) and third party administrators (TPAs) are prepared to cover FDA approved OTC COVID-19 tests without cost-sharing, prior authorization, or other medical management requirements for such tests purchased on or after January 15, 2022.

Action item(s): Plan sponsors should consider confirming that PBMs and TPAs will directly cover OTC COVID-19 tests in accordance with the Direct Coverage Safe Harbor, and if not, what actions they will take to comply with the new requirements to cover OTC COVID-19 tests. Practically, PBMs and TPAs may need additional time to establish a direct coverage program. In the meantime, plans will be required to pay the full costs of tests, even if greater than $12. Accordingly, plans have an incentive to comply with the Direct Coverage Safe Harbor as soon as possible so they can limit the cost to $12 per test, in order to help prevent price gouging.

Action item(s): Plan sponsors should consider confirming that PBMs and TPAs will help plan sponsors prepare educational materials that inform participants about OTC COVID-19 testing to ensure that participants have adequate access to OTC COVID-19 tests. Plan sponsors should further evaluate whether such materials are sufficient or whether the plan sponsor should prepare additional educational materials. Practically, until plans set up their direct coverage programs, and an adequate number of OTC COVID-19 tests are available, this requirement may be challenging to administer.

Action item(s): Plan sponsors should consider confirming that PBMs and TPAs will comply with the 8 Tests Safe Harbor. Most plan sponsors will likely want to comply with both the Direct Coverage Safe Harbor and the 8 Tests Safe Harbor so that they can limit the cost and quantity of OTC COVID-19 tests. However, practically plans will likely be able to comply with the 8 Tests Safe Harbor before they have the systems and technology to comply with the Direct Coverage Safe Harbor.

Action item(s): Plan sponsors should consider what steps, if any, their plan might take to prevent fraud and abuse, and follow up with their PBMs and TPAs regarding same. Importantly plan sponsors may want to remind participants that they cannot obtain reimbursement for OTC COVID-19 tests if participants paid for such tests with their health savings account, flexible spending account, health reimbursement arrangement, or another employer’s health plan.

Action item(s): Despite relief from the Departments, due to ERISA’s fiduciary duties and participant disclosure requirements, plan sponsors should consider sending out a summary of material modifications to participants explaining the new OTC COVID-19 rules and reviewing their summaries of benefits and coverage to determine whether any updates are necessary. Plan sponsors should work with their document preparers to adopt the appropriate plan amendments.

  1. No Provider Necessary: Effective January 15, 2022 through the end of the public health emergency, group health plans must cover FDA approved OTC COVID-19 tests without cost-sharing (i.e., deductibles, copayments, or coinsurance), prior authorization, or other medical management requirements in accordance with the Families First Coronavirus Response Act Section 6001(a)(1), even when there is no order, or individualized clinical assessment, by a health care provider. However, certain limited exceptions apply if the plan meets the safe harbors described below. Prior to this guidance, Affordable Care Act FAQs Part 43 had clarified that plans only had to cover OTC COVID-19 testing when ordered by an attending health care provider who determined the test is medically appropriate. Practically this means that a participant may purchase a COVID-19 test online, in a pharmacy, or in a store and the participant’s health plan must pay for the full cost of the test either up front or reimburse the participant’s claim.
  2. The “Safe Harbor” from Enforcement for Limiting Coverage of OTC COVID-19 Tests at Non-Preferred Pharmacies and Retailers (the “Direct Coverage Safe Harbor”): Under the Direct Coverage Safe Harbor, the Departments will not take enforcement action against a plan if the plan: (1) directly covers OTC COVID-19 tests that participants purchase through the plan’s pharmacy network and a direct-to-consumer shipping program; (2) does not impose any prior authorization or other medical management requirements on participants that obtain OTC COVID-19 tests; and (3) takes reasonable steps to ensure that participants have adequate access to OTC COVID-19 tests through an adequate number of retail locations (including both in-person and online locations). “Direct coverage” of OTC COVID-19 tests means that the plan must make the systems and technology changes necessary to process the plan’s payment to the preferred pharmacy or retailer directly with no upfront out-of-pocket costs for the participant. Very importantly, if a plan complies with the Direct Coverage Safe Harbor requirements, it can limit its reimbursement for OTC COVID-19 tests from non-preferred pharmacies and other retailers to the actual price or $12 per test (whichever is less).
  3. Potential Notice and Education Requirements: Plans complying with the Direct Coverage Safe Harbor must take reasonable steps to ensure that participants have adequate access to OTC COVID-19 tests. This includes notifying participants about the key information they need to access OTC COVID-19 testing, including the dates the direct coverage program is available, and the retailors and locations participating in the plan’s direct coverage program. Additionally, plans, regardless of whether they are complying with the Direct Coverage Safe Harbor, may also decide to provide resources regarding the different types of COVID-19 tests, the quality and reliability of OTC COVID-19 tests, how to obtain COVID-19 tests directly from the plan, or from designated sellers that offer tests at lower costs, and how to submit a claim for reimbursement for OTC COVID-19 tests.
  4. The “Safe Harbor” From Enforcement for Limiting Coverage to 8 OTC COVID-19 Tests per 30-day Period/Calendar Month (“8 Tests Safe Harbor”): Under the 8 Tests Safe Harbor, the Departments will not take enforcement action against a plan that limits the number of OTC COVID-19 tests covered for each participant to no less than 8 tests per 30-day period (or per calendar month) if the plan: (1) covers OTC COVID-19 tests without cost sharing and does not impose prior authorization or medical management requirements on such tests; and (2) does not limit participants to a smaller number of OTC COVID-19 tests over a shorter period (for example, limiting individuals to 4 tests per 15-day period). If multiple tests are sold in one package, the plan may count each test separately. Importantly this limit applies to COVID-19 tests that are administered without a provider’s involvement or a prescription. If a provider recommends or prescribes a COVID-19 test, the plan must continue to cover such provider-ordered tests regardless of whether a participant already received 8 OTC COVID-19 tests within a 30-day period.
  5. Fraud and Abuse: If reasonable, a plan may act to prevent, detect, and address fraud and abuse for coverage of OTC COVID-19 tests (e.g., through attestation, signature, or proof of purchase). Some examples of fraud and abuse include: (1) purchasing an OTC COVID-19 test for employment, rather than personal, purposes; (2) purchasing an OTC COVID-19 test and then seeking reimbursement from another source; (3) purchasing a COVID-19 test for resale purposes; and (4) falsely seeking reimbursement for the cost of an OTC COVID-19 test, such as for a family member not covered by the health plan. Importantly, any fraud and abuse program the plan implements cannot create significant barriers for participants to obtain free OTC COVID-19 tests.
  6. Summary of Material Modification Relief: Consistent with Affordable Care Act FAQs Part 42, an employer may amend the terms of a plan to cover OTC COVID-19 tests prior to satisfying any applicable notice of modification requirements.

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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