Group health plans and their insurers must provide first-dollar coverage for each enrolled individual to buy as many as eight at-home COVID-19 tests in a month, according to new guidance from the Biden administration. The requirement applies to the kinds of over-the-counter (OTC) tests that are available without a healthcare provider’s order or individualized clinical assessment, and are purchased on or after January 15, 2022.

Legislation enacted early in the COVID-19 pandemic required plans to cover certain diagnostic items without copays, deductibles, prior authorization requirements, or other medical management provisions. This already applied to tests ordered by a healthcare provider, and now will extend to OTC diagnostic tests authorized by the Food and Drug Administration.

A plan may either reimburse the retailer directly for the test or require the participant or beneficiary to submit a claim for reimbursement. “However, plans and issuers are strongly encouraged to provide direct coverage for OTC COVID-19 tests to participants, beneficiaries, and enrollees by reimbursing sellers directly without requiring participants, beneficiaries, or enrollees to provide upfront payment and seek reimbursement,” according to the January 10 document from the U.S. Departments of Labor (DOL), Health and Human Services (HHS), and the Treasury.

When providing this direct coverage, the agencies noted, plans “must take reasonable steps to ensure that participants, beneficiaries, and enrollees have adequate access to OTC COVID-19 tests, through an adequate number of retail locations (including both in-person and online locations).”

Permissible Limits

A plan may limit the number of OTC COVID-19 tests covered for each participant, beneficiary, or enrollee to eight tests per 30-day period (or per calendar month). This eight-test limit may be applied only to OTC tests, not those ordered by a healthcare provider.

Because “individuals may reasonably purchase more OTC COVID-19 tests in a single day than they would use that day or week,” and multiple family members may need testing in a short period of time, plans “must not limit participants, beneficiaries, or enrollees to a smaller number of these tests over a shorter period (for example, limiting individuals to 4 tests per 15-day period),” according to the guidance.

Coverage of OTC tests may not be limited to preferred pharmacies or retailers. However, if a plan makes direct coverage available at no cost through a pharmacy network and a direct-to-consumer shipping program, the plan may charge up to $12 (or the actual price, if less) for tests purchased out of network.

“This safe harbor is an important limitation that helps address the risk of unscrupulous retailers significantly raising prices in order to take advantage of payors,” observed Proskauer attorneys Roger Projansky and Jennifer Rigterink in a blog post. While the safe harbor’s scope and utility is currently clouded by the shortage of OTC tests, employers “will want to contact their pharmacy benefit managers or other networks in short order to determine whether they have a direct coverage solution that will satisfy the safe harbor requirements and allow the plan to impose a dollar limitation on out-of-network costs.”

Reasonable antifraud measures are still allowed, such as requiring proof of purchase with a claim for reimbursement, or a signed attestation that the test was bought for personal use (not for employment purposes), is not being reimbursed by another source, and is not for resale. However, the agencies warned, “fraud and abuse programs that require an individual to submit multiple documents or involve numerous steps that unduly delay a participant’s, beneficiary’s, or enrollee’s access to, or reimbursement for, OTC COVID-19 tests are not reasonable.”

Employment-Related Tests Excluded

Consistently with their prior guidance, the DOL, HHS, and Treasury stated that if an OTC COVID-19 test is performed for employment surveillance purposes (rather than individual diagnosis or treatment), the group health plan or insurer is not required to cover the cost.

However, it might be difficult to prevent employees from buying these tests to satisfy an employer testing requirement—for example, as an alternative to vaccination under the Emergency Temporary Standard (ETS) from the Occupational Safety and Health Administration. Even if a group health plan somehow determined that an employee had falsely attested to the contrary, the attestation would be covered by the Health Insurance Portability and Accountability Act’s (HIPAA) privacy rules, according to a blog post from Seyfarth Shaw attorneys Benjamin Conley and Adam Young.

“This means the plan would be prohibited from sharing the data with the employer, and the employer would be unable to take any adverse employment actions against the employee,” although the plan might, Conley and Young wrote. An employer could simply require a third-party-administered test for meeting the ETS requirement, but the employee might still get the test covered by obtaining a doctor’s order.

The U.S. Supreme Court has since stayed the ETS rule pending full adjudication of its legality. Click here to read about the Court’s ruling, it’s implications for employers, and what employers covered by the ETS rule should do next.

David A. Slaughter, JD, is a Senior Legal Content Specialist. His specialties include employee benefits and privacy compliance.