New Requirements to Cover Over-the-Counter COVID Tests: Implications for State Insurance Regulators

Sabrina Corlette, Georgetown University’s Center on Health Insurance Reforms

On January 15, 2022, health insurers will be subject to new federal requirements to cover and waive cost-sharing for over-the-counter diagnostic tests for COVID-19 for the duration of the federal public health emergency. Past federal guidance required insurers to fully cover COVID-19 tests, but allowed them to require enrollees to first obtain a health professional’s determination that a test is medically necessary. The new requirements, published January 10, enable consumers to obtain the tests directly from pharmacies or online retailers without being seen by a health professional. With case rates surging and the costs of over-the-counter COVID-19 tests ranging from $14 to $34, this new benefit should provide significant financial relief to privately insured individuals.

Legal Context and Key Provisions of the OTC Coverage Requirement

Congress enacted the Families First Coronavirus Response Act (FFCRA) on March 18, 2020. That law requires group health plans and insurers to cover and waive cost-sharing for COVID-19 diagnostic tests for the duration of the COVID-19 public health emergency. Another federal law, the Coronavirus Aid, Relief, and Economic Security Act (CARES), enacted on March 27, 2020 requires insurers to reimburse out-of-network testing providers their full cash price, so long as the provider posts its prices on a publicly available website. In response to insurers and state regulators’ questions about how to implement the FFCRA and CARES Act requirements, as well as the evolving pandemic and emergence of new testing technologies, the Trump and Biden administrations have published four rounds of regulatory guidance, available here, here, here, and here.

The January 10 guidance states that plan enrollees who purchase over-the-counter COVID-19 tests during the public health emergency must be able to obtain full reimbursement from their insurer, with or without a clinical assessment that the test is necessary. Plans and insurers can provide this coverage for tests purchased before January 15, but they are not required to. The administration is not prescribing how insurers design their reimbursement processes, but the guidance permits them to require enrollees to submit claims or receipts for reimbursement. The guidance does not establish any kind of time limit for how quickly plans must reimburse enrollees.

The “Direct Coverage” Option

The administration is “strongly encouraging” plans and insurers to provide direct coverage of over-the-counter tests. The guidance would provide them with an enforcement “safe harbor” if they use their pharmacy networks and direct-to-consumer shipping programs to enable consumers to obtain over-the-counter tests without facing any upfront financial obligations. Under the safe harbor, they could limit reimbursement for over-the-counter COVID tests from nonpreferred pharmacies or other retailers to $12 or the actual price, whichever is lower. This means that enrollees who choose not to use the preferred network of retailers would have to pay upfront for their test and submit receipts for reimbursement. Insurers would be allowed to cap their reimbursement at $12, even if the test had a higher cost.

Limits on COVID-19 Testing Coverage

Under another enforcement safe harbor, the administration will allow insurers to limit enrollees to 8 tests per member per month. This means, for example, a plan could limit a family of four to 32 tests per month.

Additionally, the January 10 guidance does not change the administration’s prior interpretation of FFCRA that plans and insurers are not required to provide coverage of COVID-19 testing if it is for “employment purposes.” Insurers are allowed to require enrollees to submit an attestation that they purchased the test for personal use (and not for employment purposes). Plans may also take reasonable steps to curtail waste, fraud and abuse. For example, they may ask enrollees to attest that they are not being reimbursed through another source or purchasing the test for resale.

As noted above, the FFCRA and CARES Act provisions requiring coverage of COVID-19 tests apply only for the duration of the federal public health emergency. The current public health emergency expires on January 16, 2022 and the Biden administration is expected to extend it for 90 days. If the administration decides to end the public health emergency, it has promised states at least 60 days advance notice.

Additionally, the new COVID-19 testing coverage mandate applies only to group and individual market private health plans; those who are uninsured or have Medicare are not covered by this policy. For Medicaid and the Children’s Health Insurance Program (CHIP) enrollees, the American Rescue Plan Act of 2021 made at-home COVID-19 tests without cost-sharing available beginning in March 2021. Federal guidance clarifies that at-home COVID-19 tests can include tests that collect a specimen at home and then send to a clinical lab, as well as those that are performed entirely at home. At-home tests must be provided by a “qualified Medicaid or CHIP provider of COVID-19 tests,” which can be inferred to mean a provider that meets applicable state requirements to bill for furnishing COVID-19 tests. State Medicaid agencies have authority to define medical necessity criteria and utilization management techniques for COVID-19 tests, as they do for other services.

Health Equity Issues

The January 10 guidance is only part of the Biden administration’s policymaking on COVID-19 testing. The administration has also announced it will purchase 1 billion COVID-19 tests and will send them, for free, to individuals who request them through a government-sponsored website. This could help people who are uninsured, or who need to take the tests as a condition of employment.

However, the January 10 guidance risks compounding the troubling and widespread disparities in access to and affordability of COVID-19 tests. First, by relying on a policy that in many cases will require enrollees to pay upfront for the full cost of the test, the policy disfavors individuals who lack sufficient disposable income to wait–potentially for weeks or even months–for reimbursement. Second, because insurers will have limited incentive to make the process for requesting reimbursement simple and easy, the policy favors individuals who have sufficient time and resources to research their plan’s procedures for requesting reimbursement, fill out the required paperwork, and save and submit their receipts. Third, although “direct coverage” networks could help consumers who are unable to pay upfront for tests, the guidance does not clarify what it means to have an “adequate” network of pharmacies or testing retailers. Individuals living in neighborhoods that have historically lacked access to health care services, including those provided at pharmacies, could face greater barriers to obtaining these tests than those who live in wealthier, suburban areas.

Implications for State Insurance Regulators

State insurance departments continue to be the primary entities enforcing COVID testing coverage requirements for fully insured group and individual market plans. State regulators may, but are not required to, provide insurers with the direct coverage safe harbor described above. States can also help address health equity concerns by providing guidance to insurers about how to make the reimbursement process as easy as possible, providing timelines under which insurers must remit reimbursement payments to enrollees, and delineating what would constitute an “adequate” network of preferred pharmacies or other retailers through which enrollees can obtain tests at no cost.

States can also provide a safe harbor to allow insurers to limit reimbursement to 8 tests per member, consistent with the federal guidance. States could also choose not to allow a limit, or set a higher limit, if they wish. Several states have already expanded on prior federal guidance with respect to coverage of COVID-19 tests. For example, although federal rules state that insurers can choose not to pay for tests for workplace safety, California and West Virginia require insurers to cover and waive cost-sharing for COVID-19 tests for certain essential workers.