Issues Arise as Health Plans Begin Covering At-Home COVID-19 Tests

Insurers say systems not yet ready to pay upfront costs

Stephen Miller, CEBS By Stephen Miller, CEBS January 19, 2022
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Issues Arise as Health Plans Begin Covering At-Home COVID-19 Tests

[updated: 1/21/22]

As the Biden administration's requirement that health plans and insurers cover the cost of at-home COVID-19 tests, within certain limits, took effect on Jan. 15, initial stumbling blocks were evident. Some insurers said their data processing systems were not yet ready to pay the upfront costs of tests purchased by consumers at pharmacies. Employers with self-insured health plans, meanwhile, were trying to decide the best way to pay for the tests.

"Getting up and running was a little challenging given that the regulations were issued on Monday, Jan. 10, with plan sponsors and insurers expected to comply by the following Saturday," said John Coleman, a principal with HR consultancy Mercer's health and benefits practice in Morristown, N.J.

Reminder: Coverage Requirements

A set of frequently asked questions and answers posted on Jan. 10 by the Department of Labor states that over-the-counter (OTC) test kit purchases starting Jan. 15 will be covered without the need for a health care provider's order. Plans and insurers:

  • May require a participant, beneficiary or enrollee who purchases an OTC COVID-19 test to submit a claim for reimbursement. However, plans are strongly encouraged to provide direct coverage for OTC COVID-19 tests by reimbursing sellers directly.
  • Must reimburse tests purchased by consumers outside of a preferred network but may limit reimbursement from nonpreferred providers to $12 per test (or to the test price, if lower) if the plan also offers direct coverage for OTC tests through a pharmacy network with direct shipment to consumers.
  • May elect to provide more generous reimbursement to plan enrollees up to the actual price of tests purchased from a nonpreferred provider.
  • May set limits on the number of OTC tests covered without cost-sharing but must allow up to eight tests per plan enrollee per month. A family of four, all on the same plan, would be able to get up to 32 of these tests covered by their health plan per month.
  • May not set limits on the number of covered tests if these are ordered by a health care provider following a clinical assessment.
  • May require attestation that the test is for persona use, is not for employment purposes, has not been (and will not be) reimbursed from another source, and is not for resale.
  • May require plan enrollees to provide receipts for purchased test kits.

Employees Can Order Free Tests by Mail

While plan sponsors and issuers were adjusting their benefits to cover the cost of COVID-19 at-home tests, the administration moved forward with President Joe Biden's order that the federal government purchase 500 million at-home rapid COVID-19 testing kits to be sent free of charge to Americans who request them.

The administration's action is in addition to its policy of allowing Americans to buy and get reimbursed through private insurance for at-home tests.

On Jan. 18, the government's COVIDtests.gov website began accepting orders for free COVID-19 test kits to be delivered to people's homes. Orders are limited to four tests per household from the initial batch of 500 million, according to a White House fact sheet.

Test kits will typically ship within 7 to 12 days of ordering, the White House said. The service will prioritize orders and send tests first to "households experiencing the highest social vulnerability and in communities that have experienced a disproportionate share of COVID-19 cases and deaths, particularly during this omicron surge."

Employers can inform workers about this additional avenue for acquiring test kits, as "nothing prevents employees covered by an employer-sponsored plan from going on the website and ordering tests," Coleman noted.

Some observers raised concerns that the week-plus delivery time could encourage people with no immediate need for a test to order kits and keep them on hand, which could overload the systems and cause further delivery delays.

'Nothing prevents employees from going on the government website and ordering tests.'

[Update: Through the first weeks of February, COVID-19 test kit delivery was varied, with some orders made through the website in mid-January reportedly arriving on time, while other orders had not been received weeks after ordering.]

Insurers' Systems Need Updating

Regarding the new mandate that health plans (for self-insured employers) and insurance carriers (for fully insured employers) pay for the cost of test kits, some insurers said it may take additional weeks past the government's Jan. 15 start date before they can update their systems to pay for the test kits at the point of sale, The New York Times reported on Jan. 14.

"The new process will be hard, the insurers say, because over-the-counter coronavirus tests are different from the doctor's visits and hospital stays they typically cover," health reporter Sarah Kliff wrote. "The tests do not currently have the type of billing codes that insurers use to process claims. Health plans rarely process retail receipts; instead, they've built systems for digital claims with preset formats and long-established billing codes."

Consumers who purchase at-home tests starting Jan. 15 are advised to keep their receipts and be prepared to submit them to their insurer for reimbursement. In addition, Jenny Chumbley Hogue, a Texas-based insurance broker, recommended that purchasers "save not just receipts but also the boxes that the tests come in, because some plans may require the boxes as proof of purchase," Kliff reported.

Separately, the Times reported that several large U.S. companies, including Google and Morgan Stanley, have been stockpiling rapid COVID-19 tests for their employees, noting that distributing test kits "has become the newest wellness benefit, a perk to keep employees healthy and working—even from their couches—while providing peace of mind."

SHRM Resource Hub Page
Coronavirus and COVID-19


Direct-to-Consumer Safe Harbor

The Jan. 10 guidance established a "direct coverage safe harbor" that limits a health plan's reimbursement for OTC COVID-19 tests from out-of-network (or "nonpreferred") pharmacies and other retailers to the actual price or $12 per test, whichever is less, explained Allison B. Bans, an attorney at Snell and Wilmer in Phoenix.

Under the safe harbor, the oversight agencies won't take enforcement action against a plan that:

  • Directly covers OTC COVID-19 tests that participants buy through the plan's pharmacy network and a direct-to-consumer shipping program.
  • Does not impose prior authorization or other medical management requirements on participants that buy OTC COVID-19 tests.
  • Takes reasonable steps to ensure that participants have access to OTC COVID-19 tests through an adequate number of retail locations (including both in-person and online locations).

"'Direct coverage of OTC COVID-19 tests means that the plan must make the systems and technology changes necessary to process the plan's payment to the preferred pharmacy or retailer directly with no upfront out-of-pocket costs for the participant," Bans wrote.

When working with pharmacy benefit managers (PBMs) or their party administrators (TPAs), she advised plan sponsors to "consider confirming that PBMs and TPAs will directly cover OTC COVID-19 tests in accordance with the direct coverage safe harbor, and if not, what actions they will take to comply with the new requirements to cover OTC COVID-19 tests."

Because PBMs and TPAs may need additional time to establish a direct coverage program, "in the meantime, plans will be required to pay the full costs of tests, even if greater than $12" if purchased out of network," Bans explained. "Accordingly, plans have an incentive to comply with the direct coverage safe harbor as soon as possible so they can limit the cost to $12 per test, in order to help prevent price gouging," she noted.

Managing Costs

Mercer's Coleman advised employers to take steps to keep costs down for the unbudgeted expense of paying for at-home COVID-19 tests. He suggested these three options for self-insured employers:

1. Plan ahead with the knowledge that the mandate allows for eight tests per family member per month. With an average cost of $15 per test, this could cost a plan $480 per family per month. "Obviously, not every family will need 32 tests, but it is important to assess utilization assumptions to develop a reasonable estimate of the projected cost," Coleman advised. "A plan's health consultant or actuary can help with this type of analysis."

2. For self-insured employers, balance cost versus access. A self-insured employer can decide whether to cover OTC COVID-19 tests under its medical and/or prescription drug plans. "While covering under both benefits will potentially create more access, it may lead to significantly more cost if the appropriate coordination is not in place," Coleman said. "If there's no data-sharing between the medical carrier and PBM, self-insured plan sponsors could end up covering eight tests per member per month under the medical plan and another eight under the pharmacy plan, which can get expensive."

3. Work directly with preferred OTC test sellers through a pharmacy network and a direct-to-consumer shipping program. "This allows participants to get the test without upfront payment," Coleman noted. "If plan sponsors use this safe harbor, they are able to limit reimbursement to $12 per test, or $24 if two tests are in a kit. If the direct-to-consumer option is not adopted, there is no cap on out-of-network reimbursements, which could drive-up costs for plan sponsors."


Coleman also noted that some PBMs (for drug plans) and insurance carriers (for health plans) are developing their own online direct-to-consumer option, which will allow enrollees to order tests free of charge and allow self-insured plan sponsors to limit their out-of-network costs.

Updating Plan Documents

"Plan sponsors should work with their third-party administrator or insurer to develop a process for coverage of OTC COVID-19 tests and to develop procedures to reduce the risk of participant fraud," advised a Jan. 14 alert from law firm McDermott Will & Emery. "The new requirements should be incorporated into relevant participant communications, such as open enrollment and communication materials, plan documents, summary plan descriptions and summary of material modifications."


[Addendum: 1/25/22]

Checklist: Actions Employers Should Take

Hrishikesh H. Shah, an attorney with Davis Wright Tremaine in Portland, Ore., advised employers to take the following actions.

For employers with fully insured plans:

Check with your insurance carrier to ensure that:

 Pharmacy and retailer networks, 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 health care provider involvement.

The claims and reimbursement process.

Information about network of preferred and non-preferred pharmacies/retailers and direct-to-consumer shipping program (if applicable).

Any purchase and/or reimbursement limits.

For employers with self-insured plans:

Consult with your third-party administrator or other service provider(s) about network coverage:

Making OTC COVID-19 tests available through a network of pharmacies and other retailers, and whether there is a network of preferred pharmacies and retailers.

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 direct-to-consumer shipping program (if applicable).

Any purchase and/or reimbursement limits.



Related SHRM Article:

DOL Spells Out Requirements to Pay for COVID-19 Test Kits, Beginning Jan. 15, SHRM Online, January 2022


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