Archived Insight | March 30, 2020

Impact of CARES Act on Health Plans

The Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), the third federal law that addresses the coronavirus (COVID-19) public health emergency, was signed into law on March 27, 2020. The scope of the CARES Act is sweeping.

Below, we cover highlights of the CARES Act provisions that affect group health plans:

  • Amendments to the COVID-19 testing requirements contained in the Families First Coronavirus Response Act (Families First Act) that became law on March 18, 2020
  • New rules for telemedicine offered by high-deductible health plans (HDHPs) paired with Health Savings Accounts (HSAs)

Plan sponsors must implement the new testing-related requirements, but retain flexibility under federal law to set plan terms relating to treatment of COVID-19.

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Group health plan coverage for COVID-19 testing clarified

The Families First Act requires group health plans (and insurers) to cover specific services related to testing for the virus that causes COVID-19 without cost sharing. The new requirements apply to all group health plans, including self-insured plans and grandfathered plans under the Affordable Care Act (ACA). These requirements took effect upon enactment (March 18, 2020) and apply during the currently declared public health emergency.

The CARES Act clarifies that the requirement to cover testing without cost extends to the following types of tests:

  • Tests to detect the virus that are approved, cleared or authorized by certain sections of the Federal Food, Drug and Cosmetic Act (the Drug Act)
  • Tests for which the developer has requested, or intends to request, emergency use authorization under the Drug Act (and where such authorization has not been denied)
  • Tests developed in and authorized by a state that has notified HHS of its intention to review tests to diagnose COVID-19
  • Tests determined appropriate by HHS

Plans must also cover these services without cost sharing:

  • The administration of the tests listed above
  • Items and services furnished to individuals during provider visits that result in an order for, or the administration of, one of the tests described above to the extent the items or services relate to the furnishing or administration of the test or the evaluation of whether the person needs the test.

For this requirement, provider visits include in-person or telehealth office visits, urgent care visits and emergency room visits.

The prohibition on cost sharing means that these services cannot be subject to a deductible, copayments or coinsurance. Plans and insurers are also prohibited from imposing prior-authorization or other medical-management requirements for these services.

Both the Families First Act and the CARES Act require plans to cover services related to testing for COVID-19. Neither law requires plans to cover services for treating COVID-19.

Reimbursement rates for diagnostic testing providers established

The CARES Act specifies how group health plans and insurers must reimburse providers of diagnostic testing.

If the plan (or insurer) has a negotiated rate with the provider that was in effect before January 27, 2020, the start of the public health emergency, that rate will apply throughout the public health emergency.

If the plan (or insurer) does not have a negotiated rate with the provider, the plan (or insurer) must either reimburse the provider the cash price for the service that is listed by the provider on a website or negotiate a lower reimbursement rate. (The CARES Act requires providers of diagnostic tests to post their cash price on a website. Failure to do so may result in a civil monetary penalty imposed by HHS.)

HSA-qualified HDHPs may provide remote-care services before the deductible is met

Under recent guidance issued by the Treasury Department (Notice 2020-15), HDHPs are permitted to cover testing (and treatment) for COVID-19 before the deductible is met. As a result, these plans can comply with the new testing requirements without jeopardizing the ability of employees to contribute to HSAs. They may also choose to provide treatment services for COVID-19 before the deductible is met. These rules will be in effect until Treasury issues further guidance.

The CARES Act includes a new safe harbor that permits HDHPs to provide telehealth or other remote-care services before the deductible is met. This provision took effect on March 27, 2020 and applies to plan years beginning on or before December 31, 2021.

This CARES Act provision is not limited to testing and treatment for COVID-19. In other words, telehealth and other remote care can be offered for any condition during the relevant plan years without jeopardizing the ability of employees to contribute to HSAs.

Rx no longer required for reimbursement of over-the-counter drugs

The ACA required a prescription for account-based plans to pay for over-the-counter drugs and medications. The CARES Act repeals that provision of the ACA.

Implementation guidance expected

Some details about how to implement the Families First Act and the CARES Act will not be known until guidance is issued by the Departments of Health and Human Services (HHS), Labor and Treasury, the departments responsible for implementing the application of these laws to group health plans.

Plan sponsors must also follow applicable state insurance directives

In addition to these federal requirements, insured plans will need to also follow state insurance directives applicable to them. Plan sponsors should review those state laws with their benefits professionals and implement required provisions.

On all issues involving the interpretation or application of laws and regulations, plan sponsors should rely on their legal counsel for legal advice.

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This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.