On January 10, 2022, the Departments of Labor, Health and Human Services, and the Treasury (collectively, the “Departments”) issued guidance requiring employer-sponsored group health plans to cover the cost of over-the-counter, at-home COVID-19 tests (“OTC Tests”) at no cost to plan participants starting January 15, 2022. Plan participants do not need an order from their health care provider to be eligible for the free tests.

The Department guidance strongly encourages plans to pay for OTC Tests upfront so that participants do not need to pay out of pocket and then submit a claim for reimbursement to the plan.

As an incentive for this direct coverage approach, the guidance allows plans to:

• Provide OTC Tests directly through the plan’s retail or mail-order pharmacy network, with no out-of-pocket costs to the participant; and
• Limit the amount the plan will pay for tests obtained outside of the plan’s network to $12 per test (or the cost of the test, if less).

The guidance also allows plans to limit the number of tests the plan will cover to 8 per enrolled individual in any 30-day period or calendar month. For example, a family of 5 enrolled individuals could be limited to 40 tests per month.

Consistent with previous guidance from the Departments, no reimbursement is required for OTC Tests purchased for return-to-work or other employment purposes, for other than personal use, or for resale, although the guidance limits the steps a plan can take to enforce these limits.

The new coverage mandate applies to OTC Tests obtained on or after January 15, 2022, and as long as the COVID-19-related public health emergency remains in effect (the end date of which is currently unknown).

Next Steps. Plan sponsors will need to discuss this new guidance with their prescription drug vendors (pharmacy benefit managers and insurance carriers) and develop a compliance approach. The Department guidance was issued in direct response to direction from the White House issued in early December 2021. As a result, plan vendors likely have already begun working with their pharmacy networks to develop a process for providing direct coverage for OTC Tests.

Notably, even plans that are able to provide direct coverage for OTC Tests through the plan’s network will still need to: (i) ensure that plan vendors have a process in place to accommodate reimbursement for tests purchased outside of the plan’s network, and (ii) discuss what processes the vendor will put in place to detect fraud and abuse (such as tests purchased for employment purposes or resale).

For more information about the new coverage mandate and assistance coordinating a compliance approach with plan vendors, please contact your Employee Benefits and Executive Compensation Counsel at Smith Gambrell Russell LLP.