A new series of frequently asked questions (FAQs) may bring clarity for employers with group health plans that must cover the cost of over-the-counter (OTC) COVID-19 test kits, and provides greater flexibility on the use of a safe harbor that permits capping reimbursements.
The Biden administration's requirement that health plans and insurers directly pay the cost of OTC COVID-19 test kits or reimburse purchasers, within certain limits, for the cost of such tests, without cost-sharing, prior authorization or other medical-management restrictions, took effect on Jan. 15.
No Health Account 'Double Dipping'
One of the issues the new FAQs address concerns flexible spending arrangements (FSAs), health reimbursement arrangements (HRAs) and health savings accounts (HSAs).
"The FAQ reminds plan administrators … if a health plan pays for the COVID-19 testing, that an individual cannot also receive reimbursement for such testing from an FSA or HRA," said attorney William Sweetnam Jr., legislative and technical director for the Employers Council on Flexible Legislation in Washington, D.C. "Similarly, if a health plan pays for such testing, nontaxable reimbursement from an HSA for that expense is not permitted."
If plan enrollees have incorrectly received reimbursement from an FSA or HRA for OTC tests, they "should contact the plan sponsor of the FSA or HRA to correct this error," Sweetnam said. "If the reimbursement was mistakenly received from an HSA, the individual should repay that amount to the HSA."
Paying for at-home tests through health FSAs, HSAs or HRAs is not strictly prohibited, but there's no reason to do so when employees and dependents are covered by a group health plan, given that "no double-dipping is allowed," wrote Tripp VanderWal, Brett N. Liefbroer and Brett Swearingen, attorneys at Miller Johnson in Grand Rapids, Mich. "Remind participants that they may not be reimbursed more than once for the same expense."
An earlier set of FAQs that the DOL issued on Jan. 10 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. Under this safe harbor, the health coverage must:
- Directly cover OTC COVID-19 tests that participants buy through the plan's pharmacy network or direct-to-consumer shipping programs.
- Not impose prior authorization or other medical-management requirements on participants who buy OTC COVID-19 tests.
- Take reasonable steps to ensure that participants have "adequate access" to OTC COVID-19 tests through a sufficient number of retail locations (including both in-person and online locations).
The $12 safe harbor reimbursement limit for nonpreferred providers, the Feb. 4 guidance states, generally requires that OTC COVID-19 tests are made available through at least one direct-to-consumer shipping option and at least one in-person retail option.
However, the guidance recognizes that, in "limited circumstances," a plan could satisfy the "adequate access" standard without establishing both in-person and direct-to-consumer shipping options. For example, "if a small employer's plan covers only employees who live and work in a localized area, it could be possible that distribution at a nearby location constitutes adequate access to OTC COVID-19 tests without establishing a direct-to-consumer shipping mechanism," the guidance states.
"The guidance gives plans and insurers more flexibility in how they satisfy the safe harbor," explained Timothy Stanton, and attorney with Ogletree Deakins in Chicago, and Kristine Bingman, an attorney in the firm's Portland, Ore., office. "The safe harbor does not require plans and insurers to cover 'all' COVID-19 tests on the market," they noted. "A plan may be able to cover tests from a limited number of manufacturers, such as those with which it contracts directly."
Fraud and Abuse
The guidance adds a number of steps that a plan can take to limit or discourage fraud. For instance, plans may limit reimbursements to only tests purchased from established retailers that would typically be expected to sell the tests. Plans may also require reasonable proof of purchase identifying the product and seller, original receipts, or other documents to verify that the purchase qualifies for coverage.
Robert Projansky and Roberta Chevlowe, attorneys with Proskauer in New York City, and Jennifer Rigterink, an attorney in the firm's New Orleans office, commented that "the prior guidance provided very little latitude for plans to combat fraud and abuse. As a result, some stakeholders had expressed concern that participants would turn to unregulated online resellers (e.g., eBay, Craigslist, Facebook Marketplace or Amazon third-party resellers) to purchase tests at much higher prices than from established retail partners."
They added, "The new guidance is welcome confirmation that reimbursement of tests purchased from such online resellers is not required, but plans should be sure to notify participants that they will not permit reimbursement of at-home COVID-19 tests from these resellers."
The guidance also answers questions relating to the following issues:
- Supply shortages. Enforcement agencies won't hold a plan to be out of compliance "because an individual is unable to obtain at least eight OTC COVID-19 tests per 30-day period (or per month) and is therefore unable to submit claims for such tests for reimbursement," the guidance states.
- Shipping costs. When providing OTC COVID-19 tests through a direct-to-consumer shipping program, "plans and issuers must cover reasonable shipping costs related to covered OTC COVID-19 tests in a manner consistent with other items or products provided by the plan or issuer via mail order," the guidance states.
- Lab-processed tests. Health plan coverage and reimbursement applies only to tests that are "completely used and processed without the involvement of a laboratory or other health care provider," the guidance makes clear, which excludes at-home self-collection tests that must be sent to a lab to be processed.
Lab-processed tests, however, must still be covered without cost-sharing if ordered by a health care provider.
Related SHRM Articles:
Issues Arise as Health Plans Begin Covering At-Home COVID-19 Tests, SHRM Online, January 2022
DOL Spells Out Requirements to Pay for COVID-19 Test Kits, Beginning Jan. 15, SHRM Online, January 2022