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Additional guidance on mandated coverage of over-the-counter COVID-19 tests

Additional guidance on mandated coverage of over-the-counter COVID-19 tests

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The Departments of Labor, Health and Human Services, and the Treasury have issued additional guidance on the requirement that group health plans cover in full the cost of over-the-counter COVID-19 tests. This guidance provides welcome relief and clarifications on the requirements.

Download this FYI as a printable PDF.


The Families First Coronavirus Response Act (FFCRA) included a requirement that group health plans cover COVID-19 diagnostic testing and related items and services without cost-sharing, prior authorization, or other medical management requirements. Subsequently the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), expanded the COVID-19 diagnostic testing mandate provisions. (See our July 1, 2020 FYI.) However, coverage of over-the-counter (OTC) COVID-19 tests intended for at-home use was limited to where the test was ordered by an attending health care provider who had determined that the test was medically appropriate for the individual.

With the expanded availability of OTC COVID-19 at-home tests since the passage of FFCRA and the CARES Act, in December President Biden directed the Departments of Health and Human Services, Labor and the Treasury (the departments) to issue guidance by January 15 that would require group health plans and issuers to cover in full the cost of OTC COVID-19 tests. The requirement that the OTC COVID-19 test be ordered by an attending provider would be eliminated.

On January 10 the departments issued FAQs providing guidance on the coverage requirements for OTC COVID-19 tests. Generally, group health plans must cover, without cost sharing, OTC COVID-19 tests. However, a “direct coverage safe harbor” contained in the January 10 FAQs allows a plan to limit reimbursement for OTC COVID-19 tests from out-of-network (or “nonpreferred”) pharmacies and other retailers to the lower of the actual price or $12 per test. (See our January 12, 2022 FYI Alert.)

Departments’ FAQs

On February 4 the departments issued a second set of FAQs providing additional guidance on the coverage requirements for OTC COVID-19 tests. The following is a summary of the key issues addressed in this guidance. Plan sponsors and their advisors should review both sets of FAQs in detail to ensure compliance with these rapidly evolving requirements.

Q1. Do plans have flexibility in how they establish a direct-to consumer shipping program and direct coverage through an in-person network to qualify for the direct coverage safe harbor?

The FAQs provide increased flexibility and clarification in several areas relating to the direct coverage safe harbor, and applies prospectively effective February 4.

  • Generally speaking, a direct coverage program must have “at least one direct-to-consumer shopping mechanism and at least one in-person mechanism” in order to satisfy the safe harbor requirement that the program provide “adequate access.” Access can be provided by orders placed online, by phone, through the plan’s pharmacy network, through nonpharmacy retailers or other similar arrangements.
    • The February 4 FAQs also acknowledge that limited circumstances may exist where a direct coverage program could satisfy the safe harbor’s requirement to “provide adequate access” without establishing both a direct-to-consumer shipping mechanism and an in-person mechanism. For example, a small employer’s plan that only covers employees who live and work in a local area could potentially identify a convenient OTC test distribution location without necessitating a direct shipping program and still satisfy the adequate access requirement.
    • The facts and circumstances of each situation should be carefully evaluated in determining whether a direct coverage program satisfies the safe harbor’s requirement that the program provide adequate access.
  • The new guidance also clarifies that a direct-to-consumer program can limit coverage to tests from a certain manufacturer; the program does not need to cover all eligible OTC COVID-19 tests.
    • All eligible OTC COVID-19 tests would still need to be covered by the plan outside of the direct-to-consumer program, up to the $12 reimbursement.
  • Shipping costs for tests provided through a “direct-to-consumer” program must be covered “in a manner consistent with other items or products provided by the plan via mail order.”
    • As mail order pharmacy programs do not typically charge additional costs for shipping, most direct coverage programs will not be allowed to charge shipping costs.
    • The $12 maximum reimbursement limit for tests that are not purchased through a direct coverage program is inclusive of any shipping costs and sales taxes.

Q2. Will the Departments take enforcement action against a plan that is temporarily unable to provide adequate access to OTC COVID-19 tests through its direct coverage program due to supply shortage?

No. Given the current OTC COVID-19 test supply shortages, this is welcome relief — a plan may continue to apply the $12 reimbursement limit, even when tests are temporarily not available through a direct coverage program due to supply shortages.

Q3. Is a plan permitted to address suspected fraud and abuse related to the reimbursement of OTC COVID-19 tests purchased by a participant, beneficiary, or enrollee from a private individual or via online actions, resale marketplaces, or resellers?

Yes. The guidance confirms that plans “are permitted to take reasonable steps to prevent, detect, and address fraud and abuse.” For example, a plan can disallow coverage where the tests are purchased from individuals, online auctions or resale marketplaces. Excluding coverage for purchases made from online resellers may be particularly useful in managing financial exposure for plans who do not implement a safe harbor program. However, plan sponsors must communicate any coverage limitations to participants.

Q4. Do the coverage requirements apply to COVID-19 tests that use a self-collection sample but require processing by a laboratory or other health care provider to return results (such as home-collection PCR tests that can be purchased directly by consumers)?

No. However, such tests must still be covered in full, with no employee cost-sharing, if ordered by a health care provider.

Q5. How does a plan’s coverage of OTC COVID-19 tests impact health flexible spending arrangements and similar account-based plans?

The cost of at-home COVID-19 tests are medical expenses that are eligible for reimbursement by a health FSA, HRA or HSA. However, “double-dipping” of the expense is not permitted. Any expenses reimbursed by the health plan cannot also be submitted for reimbursement to a spending account. Note, however, that if the plan adopts the safe harbor limiting the coverage to $12 per test, amounts over the $12 can be submitted to a spending account. Employers should instruct employees to not use a spending account debit card to purchase OTC COVID-19 tests that will be submitted to the health plan for reimbursement.

In closing

This additional guidance provides important relief to plan sponsors in implementing compliant programs and should be reviewed with plan advisors and any pharmacy benefit manager or plan administrator that is assisting with this program. Communications will also be very important in helping employees understand how to best use this new coverage.

Volume 45 | Issue 11