Agencies clarify plan coverage of COVID-19 tests
On February 4, the Department of Labor, IRS and Department of Health and Human Services issued additional frequently asked question (FAQ) guidance addressing the terms and conditions under which group health plans must cover over-the-counter (OTC) COVID-19 diagnostic tests.
The FAQs build on earlier guidance (FAQs Part 51) that established, during the COVID-19 public health emergency, group health plans must cover OTC COVID-19 tests that can be self-administered and self-read without the involvement of health care providers. Here are some highlights of the additional FAQs.
Direct coverage safe harbor
FAQs Part 51 established a safe harbor for plans providing direct coverage of OTC COVID-19 tests through their pharmacy networks and direct-to-consumer shipping programs. The guidance allowed such plans to cap reimbursement for tests bought from nonpreferred sellers at $12 per test or the actual purchase price, if lower.
Under the safe harbor, plans must ensure that participants have adequate access to OTC COVID-19 tests with no upfront out-of-pocket expenses. A new FAQ clarifies that “adequate access” generally requires plans to make available “at least one direct-to-consumer shipping mechanism and at least one in-person mechanism.”
A direct-to-consumer shipping mechanism can include online or telephone ordering and may be provided through:
- A pharmacy or other retailer,
- The plan or insurer directly, or
- Any other entity on behalf of the plan or insurer.
A plan will be considered to have provided a direct-to-consumer shipping mechanism if it provides direct in-person coverage through specified retailers, and those retailers maintain online platforms where individuals can order tests to be delivered. Plans must cover reasonable shipping costs consistent with other items provided via mail order.
Plans implementing in-person mechanisms must ensure access to an adequate number of purchase locations. The FAQs identify facts and circumstances the agencies will consider when determining adequacy. Plans need not cover all brands of OTC COVID-19 tests under a direct coverage program. Rather, direct coverage may be limited to tests made by certain manufacturers, such as those with which the plan has a contractual relationship or from which the plan is able to obtain tests directly.
Health FSAs, HRAs and HSAs
The cost of an OTC COVID-19 test is a medical expense generally reimbursable by a Health Flexible Spending Arrangement (FSA) or Health Reimbursement Arrangement (HRA). However, an individual can’t be reimbursed more than once for the same expense. Thus, the cost (or a portion thereof) of a test paid or reimbursed by a plan or insurer cannot be reimbursed by a Health FSA or HRA.
Likewise, an expense “compensated for by insurance or otherwise” isn’t a qualified medical expense for Health Savings Account (HSA) distribution purposes. Employers that sponsor group health plans might wish to advise their participants not to seek reimbursement from a Health FSA or HRA for a test that was paid or reimbursed by a plan or an insurer. Participants also shouldn’t use a Health FSA or HRA debit card to buy tests for which the participant intends to seek reimbursement from a plan.
Anyone who mistakenly receives reimbursement from a Health FSA or HRA for tests covered by another plan should contact the Health FSA or HRA administrator regarding correction procedures. Those who mistakenly take a distribution from an HSA must either include the distribution in gross income or, if permitted, repay the distribution to the HSA.
The additional FAQs provide valuable clarifications for employers (and insurers) that might be scrambling to comply with the OTC coverage requirement that took effect January 15, 2022. Our firm can provide further information.