Agencies Clarify Requirements for Plan Coverage of OTC COVID-19 Tests

The DOL, IRS, and HHS have issued additional 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), which clarified that, 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 a health care provider (see our Checkpoint article). Here are 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 a direct-to-consumer shipping program—allowing such plans to cap reimbursement for tests purchased from non-preferred 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 expense. 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 the plan 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, and 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.
• Inadequate Supply. An otherwise compliant plan will not be considered out of compliance with the safe harbor if it is temporarily unable to provide adequate access through its direct coverage program due to a supply shortage. The plan may continue to limit reimbursement to $12 per test for tests purchased outside of the direct coverage program.
• Fraud Prevention. Plans may limit coverage of OTC tests purchased without the involvement of a health care provider to tests purchased from established retailers that would typically be expected to sell OTC COVID-19 tests. Plans may disallow 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. Participants should be informed of any limitations on the types of sellers from which tests must be purchased.
• Home-Collection PCR Tests. The OTC guidance in FAQs Parts 51 and 52 is inapplicable to tests such as home-collection PCR tests where an individual collects a specimen at home and sends it to a laboratory for processing. However, plans must cover these types of tests in accordance with the rules for tests ordered by a health care provider.
• Health FSAs, HRAs, and HSAs. Although the cost of an OTC COVID-19 test is a medical expense generally reimbursable by a health FSA or HRA, an individual cannot be reimbursed more than once for the same expense. Thus, the cost (or portion of the cost) 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” is not a qualified medical expense for HSA distribution purposes. Plans and insurers may wish to advise their participants not to seek reimbursement from a health FSA or HRA for a test that was paid or reimbursed by the plan or insurer and not to use a health FSA or HRA debit card to purchase tests for which the participant intends to seek reimbursement from the plan. Individuals who mistakenly receive reimbursement from a health FSA or HRA for tests covered by another plan should contact the health FSA or HRA administrator regarding correction procedures. Individuals 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.

EBIA Comment: These additional FAQs provide valuable clarifications for plans and insurers scrambling to comply with the OTC coverage requirement that took effect January 15, 2022. Those implementing a direct coverage option will welcome the additional flexibility described in the FAQs. For more information, see EBIA’s Group Health Plan Mandates manual at Section XVI.C (“COVID-19: Mandated Coverage of Diagnostic and Preventive Services”). See also EBIA’s Self-Insured Health Plans manual at Section XIII.C.11 (“Coverage Mandates Relating to the COVID-19 Pandemic”), EBIA’s Consumer-Driven Health Care manual at Sections XV.C (“What Is an HSA-Qualified Medical Expense”) and XXIV.B (“HRAs May Reimburse Only Code § 213(d) Expenses”), and EBIA’s Cafeteria Plans manual at Section XX.I (“Expense Cannot Be Reimbursed (and Participant Must Certify That Reimbursement Will Not Be Sought) From Other Health Plan Coverage”).

Contributing Editors: EBIA Staff.