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Health Plans Must Cover OTC COVID-19 Tests

Updated as of February 7, 2022.

On January 10, 2022, the Departments of Labor, Health and Human Services, and the Treasury (the “Departments”) issued guidance addressing President Biden’s December 2, 2021, directive to expand free over-the-counter (OTC) COVID-19 testing to “the more than 150 million Americans with private insurance.”

While private insurers were required to cover at-home COVID-19 testing with a prescription under previous COVID-19 relief laws, beginning January 15, 2022, coverage must be provided without any prescription or clinical assessment. Importantly, this OTC Coverage Mandate does not require plans and issuers to cover any COVID-19 tests for employment purposes. The OTC Coverage Mandate extends through the end of the public health emergency, as declared by the Health and Human Services Secretary.

The Departments’ guidance encourages plans and issuers to provide members with direct access to tests with no upfront costs. In addition to establishing direct access, plans will need to ensure proper claim reimbursement channels are in place. Plans that provide direct access to OTC tests without cost sharing may limit out-of-pocket reimbursements for OTC tests from non-preferred retailers to $12 per test. Additionally, plans may limit the number of OTC tests covered to 8 tests per month per participant or beneficiary. Plans should work with vendors, third-party administrators, and pharmacy benefit managers to facilitate direct access.

On February 4, 2022, the Departments issued additional guidance on direct access requirements. The Departments clarified plans and issuers have flexibility in how they provide access to OTC tests with no up-front costs. Generally, direct access will be adequate where OTC tests are made available through at least one direct-to-consumer shipping process and at least one in-person channel. Specifically, direct access may be through online or phone orders, a pharmacy network, non-pharmacy retailers, and OTC test distribution sites established by, or on behalf of, the plan or issuer. Plans and issuers must communicate key information on how to access OTC tests to members. A plan or issuer will not fail in providing direct access due to supply shortages out of their control and may continue to limit indirect reimbursement to $12 per test. The Departments also clarified an individual cannot double-dip OTC test reimbursement in a health FSA or HRA where the test has already been reimbursed by a plan or issuer.

Setting up direct access with a head-spinning turnaround time, empty shelves, soaring OTC test prices, and record-high demand for testing in a raging pandemic is a staggering order. In the race to comply with the OTC Coverage Mandate and increased costs ahead, it’s important to remember the other rules that still apply.

  1. Plans cannot limit coverage of OTC testing based on symptoms or exposure.

    Relying on the Families First Coronavirus Response Act (FFCRA, enacted March 18, 2020) and Coronavirus Aid, Relief, and Economic Security Act (CARES Act, enacted March 27, 2020), the OTC Coverage Mandate confirms plans must cover OTC COVID-19 tests without any “medical management requirements” including imposing medical screening criteria. In plain terms, this means plans cannot require the presence of symptoms or recent exposure as a prerequisite for OTC test coverage. However, plans are only required to provide testing for individualized personal use, not for general workplace health and safety or public health surveillance.

  2. Plans cannot exclude unvaccinated participants from coverage of OTC testing.

    HIPAA’s nondiscrimination rules prohibit excluding employees from eligibility for group health plan coverage based on a health status-related factor. Vaccination is a health status-related factor. Exclusions for COVID-related claims (e.g., OTC testing) for unvaccinated or vaccinated employees are also prohibited. Imposing a premium surcharge implemented through a compliant wellness program is the exception to this rule.

  3. Plans can impose premium surcharges on unvaccinated participants.

    HIPAA limits wellness program incentives to 30% of the total cost of the medical plan coverage (50% for programs that include a tobacco-cessation incentive). The total of all wellness program incentives must be below the applicable limit. In FAQ guidance issued on October 4, 2021, the Departments confirmed that employers can incentivize employees towards vaccination with discounts on health insurance premiums (i.e without the surcharge) for those vaccinated. The wellness program must:

    • Be reasonably designed to promote health or prevent disease (the surcharge FAQs suggest setting up a toll-free hotline to schedule vaccination appointments);
    • Provide a reasonable alternative standard to qualify for the premium discount where the individual can verify COVID-19 vaccination is medically inadvisable (the surcharge FAQs suggest mandating compliance with the CDC’s mask guidelines); and
    • Give individuals the opportunity to qualify at least once per year.

    Applicable large employers considering surcharges need to confirm the plan still meets ACA affordability standards if employees forego the vaccine and have to pay a higher premium. Incentives under a wellness program that reduce the amount employees must pay for employer-sponsored coverage are not treated as reducing the employee’s required contribution for affordability calculation purposes. That is, calculate without regard to the wellness program’s reduction.

  4. There is no need to reinvent the wheel for reimbursing claims.

    Plans are encouraged, but not required, to provide participants information on OTC testing quality, direct access from designated sellers, and claim reimbursement. The Departments’ OTC Coverage Mandate guidance states out-of-pocket reimbursement for OTC tests should be handled under the plan’s normal internal claims procedures. As an initial step, plans should evaluate current reimbursement processes to determine whether streamlining for OTC tests would be beneficial and communicate the process with participants. Plans may also develop oversight of medical and pharmacy claims to prevent reimbursement double-dipping.

  5. Healthcare insurance fraud is illegal.

    Plans may act to prevent, detect, and address fraud and abuse. This can include requiring participants sign a brief document with standard healthcare fraud warnings attesting that the OTC test:

    • Was purchased by the participant for their own or other plan beneficiary’s personal use;
    • Was not purchased for employment purposes;
    • Has not been (and will not be) reimbursed by another source; and
    • Has not been (and will not be) resold.

    Plans may also require documentation of an allowed test’s proof of purchase, such as UPC code and/or receipt showing date of purchase and price. Still, access remains paramount. Any measure to prevent fraud that delays access to tests is not permitted.

  6. Look to state and local laws for whether an employer must pay for COVID-19 tests required under any workplace safety policy.

    The OTC Coverage Mandate does not require health plans to cover COVID-19 testing for employment purposes. Whether an employer needs to pay for COVID-19 testing required under a workplace policy varies by state. For example, in California, employers are required to pay for COVID-19 testing and travel expenses, but in Massachusetts, employers must pay only when testing is directed at a certain time and location. It’s important to review the latest state and local laws where you operate your business before implementing a COVID-19 testing employment policy. Only a few states have issued clear guidance on this and requirements are quickly changing. Employers may also consider directing employees to free testing sites if available in their area. But testing lines are long these days. If an employer directs an employee to obtain free testing as necessary to perform their job safely during the pandemic, under the federal Fair Labor Standards Act, they need to pay for the time spent getting that testing.

  7. SCOTUS’s decision on the OSHA ETS has no effect on the requirement to cover OTC COVID-19 tests.

    The U.S. Supreme Court’s January 13, 2022 decision to stay OSHA’s Emergency Temporary Standard has no effect on the Departments’ OTC Coverage Mandate. The OTC Coverage Mandate is not an employer mandate. Rather, it applies to health plans and is intended to expand COVID-19 testing access to plan participants.

Next Steps for Employers

Group health plans, including fully-insured, self-funded, grandfathered and non-grandfathered plans, should confirm with their TPAs and insurers that OTC COVID-19 testing will be covered without cost sharing in accordance with the Departments’ OTC Coverage Mandate.

For more information and workplace resources, employers can leverage related to the pandemic, visit the OneDigital Coronavirus Advisory Hub.  As always, if you have additional questions pertaining to your plan or situation, please reach out to your OneDigital consultant.