Plans Must Cover at-Home OTC COVID-19 Tests for Free

Beginning Jan. 15, 2022, group health plans and health insurers must cover at least eight at-home over-the-counter (OTC) COVID-19 diagnostic tests per participant, beneficiary or enrollee in a 30-day period (or a calendar month). According to FAQs Part 51, this coverage cannot impose any cost sharing (including deductibles, copayments and coinsurance), prior authorization or other medical-management requirements.

Issued by the departments of Labor (DOL), Health and Human Services (HHS), and Treasury, the FAQs clarify the president’s announcement of free at-home COVID-19 tests last month. The Centers for Medicare and Medicaid Services (CMS) has issued separate, participant-focused FAQs on the same subject.

This coverage mandate applies during the COVID-19 public health emergency (PHE), which the HHS secretary has renewed every three months since the start of 2020. The PHE will likely continue well into 2022, if not beyond. Plans may (but are not required to) provide free coverage for OTC COVID-19 tests purchased without a healthcare provider’s order or individualized clinical assessment before Jan. 15, 2022.

Highlights of the clarifying FAQ guidance include:

  • Provider order not required. Participants do not need an attending healthcare provider’s order or individualized clinical assessment to receive free coverage for OTC COVID-19 tests. This guidance supersedes FAQs Part 43, Q&A-4, which required the involvement of a healthcare provider for individuals to receive free at-home COVID-19 testing.
  • Aimed at COVID-19 diagnosis and treatment. A plan must fully reimburse participants’ claims for OTC COVID-19 tests, or provide access to free tests via “direct coverage” as described below, if the test is conducted to detect COVID-19 for individualized diagnosis or treatment. Plans may but don’t have to provide free coverage for OTC COVID-19 tests conducted for employment purposes (including to meet the Occupational Safety and Health Administration’s emergency temporary standard on COVID-19 vaccination and testing, which is in litigation limbo as of the date of this article). Plans do not need to provide free coverage of OTC COVID-19 tests conducted for public health surveillance purposes; however, neither this FAQ guidance (nor any prior FAQ guidance) explicitly defines the scope of public health surveillance activities for purpose of the cost-free coverage mandates for COVID-19 testing. Furthermore, whether cost-free coverage extends to OTC COVID-19 tests for common situations that require demonstration of a negative test – for example, attendance at certain social gatherings, return to school or travel – is not addressed in this guidance. In any event, the answer to these questions may be somewhat academic since we believe many plan sponsors and insurers may find it administratively burdensome to monitor the purposes for which a participant is seeking to obtain, or get reimbursed for, a free OTC COVID-19 test.
  • Direct coverage option; dollar limit on reimbursements. Plans may reimburse the costs of OTC COVID-19 tests using existing claims procedures and are not required to pay sellers of OTC COVID-19 tests directly. However, the guidance strongly encourages and incentivizes plans to provide a “direct coverage” option that directly reimburses preferred OTC test sellers (through a pharmacy network and a direct-to-consumer shipping program), without participants needing to provide upfront payment and seek reimbursement. Plans with a direct-coverage option may not limit coverage to only OTC COVID-19 tests purchased through those preferred sellers. However, if a plan establishes a compliant direct-coverage option — which includes ensuring that participants have “adequate access” to OTC COVID-19 tests through a sufficient number of online and in-person retail locations — a plan can then limit reimbursement to the lesser of the test price or $12 per test purchased from nonpreferred pharmacies or other retailers. If a kit contains multiple tests, plans with a direct-coverage option must calculate the reimbursement based on the number of tests in the package. 

Example. A plan with a direct-coverage option may (but is not required to) limit reimbursement for a $34 package of two OTC COVID-19 tests to $24. Conversely, a plan without a direct-coverage option must reimburse the full cost of $34.  

  • Quantity and frequency limits. Plans must cover at least eight free OTC COVID-19 tests in a 30-day period (or a calendar month) for each participant, enrollee or beneficiary. For example, a family of four is eligible for 32 free tests in a 30-day period. Plans may not limit coverage to a smaller number of these tests over a shorter period of time (for example, four tests per 15-day period). This limit applies only to OTC COVID-19 tests; it does not apply to tests ordered or administered by an attending healthcare provider. If a package contains multiple tests, the plan may count each test separately.
  • Fraud and abuse. Plans may implement reasonable steps for addressing potential fraud and abuse, such as requiring:
    • An attestation that the test is for the individual’s (or family member’s) personal use, is not for employment purposes, has not been (and will not be) reimbursed from another source, and is not for resale
    • Reasonable documentation of proof of purchase for claims reimbursement (the CMS FAQs remind participants five times to keep receipts)

The Biden administration has announced it expects to offer 500 million at-home COVID-19 tests for free at various locations and through a website. The availability of these free tests does not reduce plans’ obligations to comply with this coverage mandate. More information is expected soon.

Rich Glass
by Rich Glass

Principal, Mercer’s Law & Policy Group

Dorian Smith
by Dorian Smith

Partner, Mercer’s Law & Policy Group

Register for Mercer US Health News to receive weekly e-mail updates.