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Health Plans Required to Pay for Over-the-Counter COVID-19 Tests

January 13, 2022

By Christine M. Zinter


Earlier this week, the U.S. Department of Health & Human Services, Department of Labor, and the Treasury (the “Tri Agencies”) published guidance outlining that health plans and health insurance companies must cover and/or reimburse enrollees for over-the-counter (“OTC”) COVID-19 diagnostic tests. Starting this Saturday, January 15, 2022, and running through the end of the declared public health emergency, health plans must cover at least eight (8) consumer-purchased at-home tests per 30-day period per individual beneficiary. This builds on an existing mandate under the Families First Coronavirus Response Act (“FFCRA”) and the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) that required health plans to pay for testing by third-party healthcare providers, which has been in effect since March 2020.

Who Has to Comply?

Both health insurance companies and employer self-funded health plans are required to comply with this new requirement effective January 15, 2022. Again, health plans must cover at least 8 OTC tests per 30-day period per beneficiary—a family of 4 is entitled to 32 tests every 30 days. Plans cannot put further internal limits on the quantity (for example, a health plan could not limit an enrollee to 4 tests per 15 days).

This mandate only covers OTC at-home tests. Individuals seeking a lab-based test performed by a provider or testing facility will still be subject to the health plan’s medical necessity requirements. There remains no limit on tests ordered by a healthcare provider for medically necessary diagnostic purposes.

What Test Kits Are Covered?

The law broadly requires coverage of any testing that 1) has been approved, cleared, or authorized by the FDA; 2) the developer has requested or intends to request emergency use authorization; 3) are developed in and authorized by a state that has notified the Secretary of HHS of its intention to review COVID-19 diagnostic tests; or 4) other tests that the Secretary of HHS determines are appropriate. Thus, part of the claim substantiation process could include requiring a copy of the product’s UPC so that the health plan can determine whether the test qualifies for coverage.

There are currently only 13 OTC at-home tests approved by the FDA, though the list is ever-changing due to an accelerated pathway for FDA approval of such tests. To find out if a particular OTC test is approved, follow this link to the FDA website and search for “OTC” in the search box.

How Will Health Plans Provide Coverage?

Health Plans can choose to provide this coverage in one of two ways. First, the health plan can simply reimburse enrollees for 100% of their out-of-pocket costs by having the enrollees submit a paper claim for reimbursement. Health plans choosing this option cannot limit coverage or reimbursement to only tests purchased at in-network pharmacies, nor can they put a cap on the amount of any reimbursement.

Alternatively, health plans can make tests available for free by directly paying providers for the tests, known as the direct coverage option. Health plans are encouraged to use their bargaining power with in-network pharmacies and other retail providers to streamline access to the tests (it may be burdensome for individuals to pay for the tests out of pocket and wait for reimbursement). Health plans choosing this option also receive a safe harbor benefit allowing them to cap the reimbursement of out-of-network purchases to the lessor of the actual cost paid per test or $12 per test. This $12 limit should help mitigate the risk of price gouging by manufacturers and sellers who might be tempted to raise the price of tests significantly. The cap is based on the number of tests per package, so a package containing two tests would be eligible for a $24 reimbursement.

It may take some time for health plans to set up their direct coverage option. Until a plan is ready for enrollees to pick up free tests right at the retail establishment, it must provide 100% reimbursement of all tests purchased. Further, to be in compliance and take advantage of the safe harbor, the health plan must ensure adequate access to network facilities.

Can Health Plans Put Any Other Requirements on Reimbursement?

In short, no. Unlike the prior free testing mandate under the FFCRA and CARES Act, this new mandate does not allow a health plan to require a healthcare provider’s medical recommendation for the test. The mandate prohibits any cost-sharing, prior authorization, or any other medical management requirements.

Plans may take reasonable steps to combat suspected fraud, waste, and abuse, such as requiring reasonable documentation of proof of purchase, an attestation that the tests were purchased for a covered person and not being used for resale (we do not want to see auctioning your test kits on eBay!), and that the test was not reimbursed by another source (e.g., a flexible spending account reimbursement or reimbursed by an employer).

Does This Mandate Cover Tests for Employment Purposes?

Importantly - No.

Health plans will not be required to cover at-home tests purchased in bulk by employers to satisfy any vaccinate-or-test mandate. In fact, the Tri Agency guidance specifically indicates that health plans do not have to pay for tests purchased solely for the purpose of employment-related testing. Health plans will be allowed to seek an attestation from enrollees that the tests are being purchased for personal use and not for employment purposes. While this may provide a small deterrent against employees relying on free at-home test kits to satisfy any requirements of an OSHA or other employer-mandated testing rule, in practicality, there is no way for health plans to prove the veracity of such attestations. 

What Does This Mean for Employers and Your Health Plan?

Employers sponsoring fully insured group health plans should expect to see educational materials being promulgated by their insurance company very soon (if you haven’t already). Employers choosing to self-fund benefits should be in touch with their brokers and/or third-party administrators to discuss the necessary Plan amendments. Self-funded plans may reasonably expect to see a spike in claims costs if/when enrollees start using this benefit—if 200 participants purchase 8 tests per month at $12 per test, a Plan’s claims will increase nearly $20,000 per month. However, this hit to the claims funding account may be mitigated by the fact that such tests are already in short supply.

If employers have any questions about this new health plan mandate or how to comply with other COVID-19 mandates and guidelines, contact Bullard Law.

The content of this Alert is provided for general information purposes only. It should not be considered legal advice or used as a substitute for consulting an attorney for legal advice.

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