On February 4, 2022, federal regulators issued regulatory guidance in FAQs (Part 52) regarding mandatory coverage of certain at home or over-the counter COVID-19 diagnostic tests (OTC COVID-19 tests). This guidance modifies the previously issued guidance found in FAQs (Part 51).
FAQs (Part 51) previously explained that group health plans and insurers (collectively, “plans”)1 must provide coverage without cost-sharing, prior authorization or other medical management requirements of OTC COVID-19 tests that meet statutory criteria2 without an order or individualized clinical assessment by a health care provider when purchased on or after January 15, 2022 during the public health emergency. This does not require plans to cover testing for employment purposes.
Revised Safe Harbor Criteria
FAQs (Part 51) explained the safe harbor that plans had to meet before plans could limit the reimbursement rate to $12 per test3 purchased out of network or outside the “direct coverage” program. Under the new guidance, regulators are providing more flexibility for plans to meet the criteria for such safe harbor:
Plans must provide “direct coverage” by ensuring participants have “adequate access” to OTC COVID-19 tests with no upfront out-of-pocket expenditure. Regulators stated it depends on the facts and circumstances but, generally will require that OTC COVID-19 tests be made available through at least one direct-to-consumer shipping mechanism and at least one in-person mechanism. However, in footnote 14 of the guidance, regulators state there may be some limited circumstances in which a direct coverage program could provide adequate access, and therefore satisfy the safe harbor, without establishing both a direct-to-consumer shipping mechanism and an in-person mechanism. Their 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.
“Direct coverage” may be provided through a number of ways, including, but not limited to:
- a direct-to-consumer shipping program via online or telephone order
- the plan/insurer’s pharmacy network
- other non-pharmacy retailers (including distributing coupons for enrollees to receives tests from certain retailers without cost share)
- distribution sites established by or on behalf of the plan – such as a standalone drive-through or walk-up distribution site that operates independently of a pharmacy or other retailer.
“Adequate access” does not require making all OTC COVID-19 tests that meet statutory criteria available to participants through the direct coverage program. Adequate access may be met if that coverage consists of tests from a limited number of manufacturers, such as those with whom the plan has a contractual relationship or from whom the plan has been able to obtain OTC COVID-19 tests directly. Federal regulators may request information from plans to ensure that participants have adequate access to OTC COVID-19 tests, such as the number and location of in-person options.
Plans should ensure that participants are aware of key information needed to access OTC COVID-19 tests, such as which tests are available under the direct coverage program, and if offering different mechanisms for obtaining tests under the program, which tests are available under each mechanism.
Plans must cover reasonable shipping cost of the covered OTC COVID-19 tests in a manner consistent with other items and products provided by the plan via mail order.
No Enforcement Action if OTC COVID-19 Tests are in Short Supply
A plan will not be considered to be out of compliance with the safe harbor if it is temporarily unable to provide adequate access to OTC COVID-19 diagnostic tests through the program due to a supply shortage. The plan that otherwise meets the requirements of the safe harbor may continue to limit reimbursements to $12 per test (or the full cost of the test, whichever is lower) for OTC COVID-19 tests purchased outside of the network/direct coverage program.
May Exclude Coverage of OTC COVID-19 Tests From a Private Individual, Online Auction or Resale Marketplace
Plans may exclude coverage of an OTC COVID-19 test sold by a private individual via an in-person or on-line person-to-person sale, or from a seller that uses an online auction or resale marketplace provided the plan informs the participant as to the types of resellers whose tests are not covered by the plan and the retailers whose tests are generally covered.
As explained previously in FAQs (Part 51), plans can also require reasonable documentation of proof of purchase that clearly identifies the product and seller, such as a UPC code or other serial number, original receipt from the seller, or other documentation to verify that the item qualifies for coverage, or a requirement that the participant attest that the test has not been or will not be reimbursed by another source (including through resale).
Guidance Does Not Apply to Self-collected Sample Tests Requiring Laboratory/Provider Processing
Regulators clarified that the guidance previously provided in FAQs Part 51 and now in 52, apply to FDA-approved, cleared or authorized OTC COVID-19 tests that do not require a prescription and may be completed without the involvement of a laboratory or other health care provider.
Interaction of Plan’s Coverage and A Health Flexible Spending Arrangement, HRA or HSA
If a plan reimbursed the cost of an OTC COVID-19 test, a health FSA or HRA cannot also reimburse for that same expense. If a person mistakenly receives reimbursement from a health FSA or HRA for OTC COVID-19 test costs covered by a plan, the person should contact the health FSA or HRA administrator regarding correction procedures. A distribution from a person’s HSA is not included in the person’s gross income if such funds are used to pay for qualified medical expenses (i.e. such amounts are not compensated for by insurance). If a person mistakenly takes a distribution from an HSA for OTC COVID-19 test costs paid or reimbursed by a plan, the person must either 1) include the distribution in gross income, or 2) repay the distribution to the HSA, if and as permitted under IRS Notice 2004-504 (Q&A -37 and -76).
2Section 6001(a)(1) of the Families First Coronavirus Response Act (FFCRA) as amended by the section 3201 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), describes in vitro diagnostic tests for the detection of SARS-Co-V-2 or the diagnosis of COVID-19 that (A) are approved, cleared, or authorized under section 510(k), 513, 414, or 564 of the Federal Food, Drug and Cosmetic Act (FFDCA); (B) the developer has requested or intends to request, emergency use authorization under Section 564 of the FFDCA, unless and until the emergency use authorization request under such Section 564 has been denied or the developer of such test does not submit a request under such section within a reasonable timeframe; (C) are developed in and authorized by a state that has notified the Secretary of HHS of its intention to review tests intended to diagnose COVID-19; or (D) are other tests that the Secretary of HHS determines appropriate in guidance.
3When providing coverage outside the direct coverage program, plans/insurers must cover up to the lesser of: the actual price or $12.00 per test, including shipping and sales tax.
4IRS Notice 2004-50 (Revised August 9, 2004), available at http://www.irs.gov/pub/irs-drop/n-04-50.pdf