Covering At-Home COVID-19 Tests: Your Top Questions Answered
Effective January 15th, most health plans must cover at-home over-the-counter (OTC) COVID-19 tests that members purchase at a pharmacy, retail store or online. The new FAQ guidance issued by the departments of Labor, Health and Human Services, and Treasury require group health plans to cover a minimum of 8 at-home OTC COVID-19 tests per member per month, either by making tests free at the point of sale or by reimbursing the participant. Despite increases in availability of community COVID-19 testing, employer-sponsored group health plans will experience new expenses associated with this coverage.
With so little time to prepare, many medical carriers, third-party administrators (TPAs), and pharmacy benefit managers (PBMs) are still working out and communicating coverage options and administrative details. Meanwhile, employers want to make sure it’s as easy as possible for their members to obtain tests -- and also understand what they can do to manage these costs. Here are four questions to consider as this new program shifts into high gear:
1. Should group health plans cover at home OTC COVID-19 tests under the medical or pharmacy benefit?
When determining how to reimburse plan participants for at-home OTC COVID-19 tests, consider your vendor capabilities and cost. Confirm your medical carrier/TPA’s and PBM’s response to the mandate. If both are covering the tests, assess their ability to cross-accumulate claims to cap coverage at the plan’s monthly test maximum. If your medical carrier/TPA is not willing (or able) to administer OTC claims then coverage must be provided under the pharmacy benefit, or other means, to ensure compliance and member access to the tests.
For self-funded plan sponsors, there is a need to balance cost versus access. Covering at-home OTC COVID-19 tests under both the medical and pharmacy benefits will create more access but may lead to increased costs if the vendors cannot cross-accumulate claims. You may also see increases in administration fees.
2. Should group health plans impose quantity limits?
Group health plans must cover eight individual OTC COVID-19 tests per person enrolled in the plan per month. That means a family of four can get 32 at-home OTC COVID-19 tests per month at no cost. Employer plan sponsors should consider establishing quantity limits to prevent overutilization but may also decide on a higher limit or no limit at all. For example, if a group health plan’s PBM and medical carrier/TPA systems can’t cross-accumulate claims, then a plan sponsor might choose to allow 16 at-home OTC COVID-19 tests per individual per month – eight via the pharmacy benefit and eight via the medical benefit. Remember, eight at-home OTC COVID-19 tests per member per month is the floor imposed by the guidance – plan sponsors can certainly decide to cover more tests.
3. Should group health plans offer a direct coverage option?
Federal guidance strongly encourages and incentivizes plans to provide a direct coverage option. Direct coverage provides reimbursement directly to preferred sellers of at-home OTC COVID-19 test through both a pharmacy network and a direct-to-consumer shipping option, without requiring any upfront payment from plan participants. Under the direct coverage option, participants must have adequate access to OTC COVID-19 tests through a sufficient number of both in-person and online retail locations.
Since some pharmacies may not have the systems or technology to directly bill OTC COVID-19 tests through the medical benefit, restricting coverage to the medical benefit may result in a plan sponsor not meeting the requirements of offering a direct coverage option. Plans without a direct coverage option may be exposed to increased cost as reimbursement cannot be limited. For example, if plan sponsors successfully implement the direct coverage option, they are able to limit reimbursement to $12 per test (or $24 if two tests in a kit) for at-home OTC COVID-19 test purchased from non-preferred sellers, pharmacies, or other retailers. If the direct coverage option is not implemented, plans are prohibited from imposing a reimbursement dollar cap on at-home OTC COVID-19 tests purchased from non-preferred sellers, which could drive up costs for plan sponsors.
Some PBMs and carriers/TPAs are developing their own online direct-to-consumer shipping option, which will allow enrollees to order at-home OTC COVID-19 tests free of charge and allow self-funded plan sponsors to limit their costs attributable to uncapped reimbursements for at-home OTC COVID-19 test purchased from non-preferred sellers.
4. When and how should group health plans communicate this to members?
While group health plans are working through their options, employer plan sponsors should begin communicating with members about when more information will become available and advise them to save their receipts for at-home OTC COVID-19 tests purchased on/after January 15. Plan sponsors may also want to remind members that they can get four free tests through COVIDTEST.gov, which would cost the plan (and members) nothing because it will redirect demand to the government site. These government-provided OTC COVID-19 tests do not count towards the minimum benefit of eight OTC COVID-19 tests per member per month.
The new requirements should be incorporated into relevant participant communications as soon as plans have finalized a process for coverage of at-home OTC COVID-19 tests and developed procedures to reduce the risk of participant fraud and abuse. Guidance directs group health plans to ensure participants are aware of the information necessary to access at-home OTC COVID-19 testing, including availability of a direct coverage option, participating retailers, and where to obtain additional information. Group health plans subject to ERISA should prepare to distribute a Summary of Material Modification (SMM) describing the coverage change.
For more information, Mercer’s Law & Policy team explained the new mandate and broke down the guidelines for group health plans here.