DOL Guidance for Over-the-Counter COVID-19 Tests

Group health plans and health insurance issuers must provide benefits for certain items and services related to testing for the detection and diagnosis of COVID-19, including over-the-counter (OTC) COVID-19 tests. Effective January 15, 2022, the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act require that these services be provided without imposing cost-sharing requirements, prior authorization, or other medical management requirements.

While the guidance significantly expands access to low-cost or no-cost COVID-19 at-home tests, the various range of solutions and implementation creates a communication challenge to employers. Sponsors of group health plans must review and carefully guide participants through the coverage details such as “direct coverage” or “reimbursement” options. Clear communication is especially important if the employer offers plans from multiple carriers.

On February 4, 2022, the Departments of Labor (DOL), Health and Human Services (HHS), and the Treasury (collectively, the Departments) issued Frequently Asked Questions (FAQs). These FAQs provide additional guidance on the requirement to provide coverage for OTC COVID-19 tests without a prescription or individualized clinical assessment from a health care provider.

Prior to the expansion of the health plan free testing mandate to include OTC COVID tests, the IRS issued a reminder that at-home testing expenses are eligible expenses under a health FSA, HRA, or HSA. The guidance confirmed that COVID testing is an eligible expense because the cost to diagnose COVID is a Section 213(d) medical expense.

Worth noting however, the IRS imposes a blanket rule prohibiting individuals from “double dipping” with account-based plans that prevents using the account for expenses reimbursed by the health plan. The prohibition also includes tax deductions. Now that OTC COVID tests are generally covered by the health plan, employees will need to carefully consider the best way to be reimbursed for OTC tests, considering that health plans will pay in full and leaving health FSA, HRA, or HSA dollars for other expenses. Employers are responsible to communicate all necessary facts to aid in the decision.

Notable guidance within the FAQs include:

Limits on Coverage: Plans or issuers may limit reimbursement to the lesser of the actual price of the test, or $12 per test. Each covered participant, beneficiary, or enrollee may be reimbursed for at least eight tests per 30-day period (or per calendar month). The plan or issuer must calculate the reimbursement based on the number of tests in a package.

Direct-to-Consumer Coverage: Plans or issuers that provide direct coverage of OTC COVID-19 tests through both a pharmacy network and a direct-to-consumer program, and otherwise limits reimbursement for OTC COVID-19 tests from nonpreferred pharmacies or other retailers to the lesser of the actual price of the test, or $12 per test, will not be subject to enforcement action. To provide adequate access, the plan or issuer must make OTC COVID-19 tests available through at least one direct-to-consumer shipping mechanism and at least one in-person mechanism. The direct-to-consumer mechanism may include online or telephone ordering, but the plan or issuer must cover the cost of shipping.

FSA/HRA/HSA: The cost of OTC COVID-19 tests purchased after January 15, 2022, are eligible for reimbursement from a group health plan or issuer. Individuals may not seek reimbursement more than once for the same medical expense. When notifying individuals about any direct coverage or reimbursement, the plan or issuer must include a reminder stating that the same medical expense may not be submitted to a health flexible spending account (FSA), health reimbursement arrangement (HRA), or health savings account (HSA).

Impact of Supply Shortage: Plans or issuers will not be out of compliance if they temporarily cannot provide adequate access because of a supply shortage.

Fraud or Abuse: Plans or issuers may take reasonable steps to prevent, detect, and address fraud and abuse. For example, a plan or issuer can require tests to be purchased from an established retailer, substantiate the purchase by carefully reviewing receipts and documentation, and require the individual to attest that the product will not be resold.

Self-Collected Sample with Lab Processing: OTC COVID-19 tests must be self-administered and self-read without the involvement of a health care provider. The OTC COVID-19 coverage rules do not apply when an individual sends the specimen to be processed in a laboratory. These tests must be ordered by a healthcare provider.