The departments of Labor, Treasury and Health and Human Services published new FAQs on the over-the-counter (OTC) COVID-19 diagnostic test coverage mandate in effect since Jan. 15. The FAQs provide additional detail about the direct coverage safe harbor established in earlier guidance, and touch on other topics such as how employers can curb fraud and abuse and the impact of the testing mandate on account-based plans.
More on the direct coverage safe harbor. Earlier guidance permits a health plan or insurer that establishes a compliant direct-coverage option—which includes ensuring that enrollees have “adequate access” to OTC COVID-19 tests through a sufficient number of online and in-person retail locations—to cap reimbursement to the lesser of the test price or $12 per test purchased from nonpreferred pharmacies or other retailers. The new FAQs provide the following additional guidance about the direct coverage requirements (with the exception of the enforcement relief, the direct coverage guidance is effective Feb. 4, 2022):
- Adequate access. The departments reiterated that adequate access through a direct coverage program depends on facts and circumstances. Adequate access can be satisfied a number of ways: an established network, a non-pharmacy retailer (including distributing coupons to plan enrollees to get tests from the retailers for free) and alternative OTC COVID-19 test distribution sites. Generally, tests need only be available through at least one direct-to-consumer shipping mechanism and at least one in-person mechanism. Adequate access does not require that all OTC COVID-19 tests be available through direct coverage—a plan may be able to provide adequate access by covering tests from a limited number of manufacturers. However, all other OTC COVID-19 tests must be covered when obtained from nonpreferred providers and other retailers, subject to the limitation of $12 per test. Plans must make enrollees aware of key information needed to access OTC COVID-19 tests, including the different direct coverage options and which tests are available through direct coverage. The departments may seek information to determine whether the plan provides adequate access.
- Supply shortage enforcement relief. The departments will not consider a plan that has established a compliant direct coverage program to be out of compliance if it is temporarily unable to provide adequate access through the direct coverage program due to a supply shortage. Keep in mind that plans and insurers are not required to offer a direct coverage program; it is simply required to take advantage of $12 per test limitation.
- Direct-to-consumer shipping. A direct coverage program must offer one direct-to-consumer shipping mechanism, but exclusive access through one entity isn’t required. Direct-to-consumer shipping can be through online or telephonic means. Reasonable shipping costs must be covered by the plan, consistent with other mail-order items or products provided by the plan.
- Shipping and taxes for tests from nonpreferred providers. When an individual bypasses direct coverage, and seeks reimbursement of an OTC COVID-19 test from a nonpreferred provider, the price of the test includes shipping and sales tax costs related to the purchase, up to $12 per test.
Example. Eight tests purchased from a nonpreferred provider cost $8 each, plus total shipping costs and sales tax of $20, for a total cost of $84. The plan must reimburse the entire $84 because it is less than $12 per test (8 x $12 = $96).
FAQs beyond direct coverage. The remaining FAQs appear to be effective retroactive to Jan. 15 and address other topics, including the following:
- 30-day period. Earlier FAQs allow health plans to limit coverage to eight tests per 30-day period or calendar month. The FAQs clarify that this may be a rolling 30-day period.
Example. A plan could disallow a request for eight tests on March 4 if the participant already requested eight tests on Feb. 28.
- Tests requiring third-party processing. Tests that use a self-collected sample but involve a lab or other health care provider for results are not included in the OTC COVID-19 testing mandate. The mandate is limited to self-administered, self-read tests that do not require third-party involvement.
- Fraud and abuse. Reimbursement may be disallowed when the purchase is via an in-person or online person-to-person sale, an online auction or resale marketplace. A fraud/abuse policy can require proof-of-purchase documentation that identifies product and seller – like a UPC code or serial number – or an original receipt. A plan with this type of fraud/abuse policy should provide information to enrollees regarding covered retailers and general information about resellers whose sales are ineligible for reimbursement.
- Health FSAs, HRAs and HSAs. The departments offered several reminders related to account-based plans. OTC COVID-19 tests are a medical expense and are reimbursable health FSAs and HRA expenses if they have not been reimbursed from another source. As a result, individuals should not seek reimbursement from both the medical plan and their health FSA/HRA (whether by debit card or submitted claim). If that occurs, standard correction procedures apply. Plan sponsors would be wise to address these rules in participant communications. HSAs may reimburse for OTC COVID-19 tests, but if the test was covered by the plan, then the HSA distribution is taxable to the account holder, unless the account holder is able to repay a mistaken HSA distribution under existing guidance.
Employers should make sure that their plan’s OTC COVID-19 test coverage satisfies this latest guidance. For background about the OTC COVID-19 test mandate, see our prior posts, Plans Must Cover at-Home OTC COVID-19 Tests for Free and Covering At-Home COVID-19 Tests: Your Top Questions Answered.