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

Update Feb 10: This advisory has been updated to include the latest information on the requirement that employer group health plans must pay for over-the-counter COVID-19 tests.

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 compliance. Specifically, as soon as possible a plan's claims and reimbursement systems should be adapted to provide the necessary coverage (a list of employer action items for fully insured and self-insured plans is at the end of this article).

The U.S. Departments of Labor, Treasury and Health and Human Services 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. In February, the agencies issued a second set of clarifying FAQs. This blog post has been updated to reflect the guidance issued in the second set of FAQs.

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 at least one in-person mechanism (e.g., the plan’s preferred pharmacy network, other retailers, or standalone drive-through or walk-up distribution sites) and at least one direct-to-consumer shipping program;
• The agencies clarified that a direct-to-consumer shipping program includes any program that provides direct coverage of OTC tests without requiring the individual to obtain tests at an in-person location, e.g., online or telephone ordering through a pharmacy, other retailer, or any other entity on behalf of the plan. Note that the plan must cover reasonable shipping costs related to OTC tests; 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. The agencies clarified in the second FAQs that a plan is not required to make all FDA-approved OTC tests available to its participants through its direct coverage program.

Accordingly, plans could exclude tests from certain manufacturers under its direct coverage program, though they are still required to reimburse participants for all approved tests outside of the direct coverage program. Plans must make participants aware of key information needed to access COVID-19 testing, such as which tests are available through the direct coverage program, dates of availability of the direct coverage program, and participating retailers or other locations. Plans should also be prepared to respond to information requests from regulating agencies regarding adequate access to OTC tests.

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. However, the second set of FAQs clarifies that the regulating agencies will not consider a plan to be out of compliance if the plan’s direct coverage program otherwise meets the safe harbor requirements, except that it is temporarily unable to provide adequate access to tests through the program due to a supply shortage. In such a case, the plan can continue to limit reimbursements to the lesser of $12 per test or the actual cost of the test.

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. The second set of FAQs also confirmed that this guidance does not apply to tests that use a self-collected sample but require processing by a laboratory or other healthcare provider for results (such as home-collection PCR tests). 

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;
• 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; or
• Limiting coverage of OTC tests to established retailers that would typically be expected to sell tests, e.g., disallowing reimbursement for tests purchased from a private individual via an in-person or online person-to-person sale, or from a seller that uses an online auction or resale marketplace. Such a policy could require any proof of purchase to clearly identify the seller of the test for reimbursement, and an attestation that the purchaser has not been reimbursed by another source (including through resale).

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 ).

Impact on Account-Based Plans

The second set of FAQs clarifies that because this guidance generally requires plans to cover the costs of OTC tests, plans should notify participants not to seek reimbursement from account-based plans, such as health flexible spending accounts (health FSA), health reimbursement arrangements (HRA), or health savings accounts (HSA). Because participants may not be reimbursed for the cost of a test more than once, obtaining reimbursement from an account-based plan will displace (if not corrected) the group health plan’s reimbursement obligation.

Similarly, plans should advise participants not to use debit cards associated with account-based plans to purchase OTC tests for which they plan to seek reimbursement from the group health plan. Plans should have correction procedures in place for any OTC tests whose costs are mistakenly reimbursed by account-based plans. Any participants who receive reimbursement from their account-based plans for OTC tests that have also been reimbursed by their plan must include the distribution received from their account-based plans in their taxable income unless corrected through the Plan’s established correction procedure.

Action Items

For employers with fully insured plans:

• Check with your insurance carrier to ensure that:
  
  • Pharmacy and retailer networks, other distribution sites, 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 healthcare provider involvement.
  • The claims and reimbursement process.
  • Information about network of preferred and non-preferred pharmacies/retailers and distribution sites, and direct-to-consumer shipping program (if applicable).
  • Information about which manufacturer’s tests are available under which distribution mechanism (if applicable).
  • Any purchase and/or reimbursement limits.
  • Not to: (1) seek reimbursement for the costs of OTC tests from both the plan and from account-based plans (health FSA, HRA, or HSA); (2) use debit cards associated with account-based plans to purchase OTC tests. Plans should have correction procedures in place in case this does occur.

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, other retailers, and other distribution sites, and whether there is a network of preferred pharmacies, retailers, and distribution sites.
  • 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 distribution sites, and direct-to-consumer shipping program (if applicable).
  • Information about which manufacturer’s tests are available under which distribution mechanism (if applicable).
  • Any purchase and/or reimbursement limits.
  • Not to: (1) seek reimbursement for the costs of OTC tests from both the plan and from account-based plans (health FSA, HRA, or HSA); (2) use debit cards associated with account-based plans to purchase OTC tests. Plans should have correction procedures in place in case this does occur .

Please contact your DWT attorney for more information.