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COVID Testing and Health Plan Reimbursements

January 13, 2022

By Scott Lyon, SBAM Senior Vice President

No doubt, over the last few days you have heard the Biden Administration explaining to the American public that COVID tests will be “free” to everyone covered by “private insurance.”  Unfortunately, this messaging is misleading.  Yes, your enrolled employees and their dependents (if any) may not have to immediately pay for COVID tests they purchase over the next few months of 2022.  But, you and these employees will indeed end up paying for the cost of these tests in the form of higher health insurance premiums in 2023.  It’s just how the system works – higher claims result in higher premiums.  You know it and we know it.

With that as background, here is a general outline of how COVID testing will be paid for by insurance carriers:

  • An insurance carrier and self-insured plan must pay for the cost of a COVID test that a participant and their dependents (if any) purchase “over-the-counter” (OTC) at a pharmacy or through other retailers (including on-line purchases).
  • It does not matter if the COVID test was ordered by a physician as being “medically appropriate.” 
  • It only matters if the COVID test was purchased because the participant and their dependents (if any) wanted to “individually” find out if they are COVID positive or not. 
  • If an employer requires a participant and their dependents (if any) to take a COVID test (instead of the participant/dependents simply wanting to “individually” find out if they are COVID positive or not), the carrier and plan are not required to pay for this “employer mandated” test.  Presumably the employer would pick up the cost for the test in this case.
  • The federal statute does not specify “how” a carrier and plan should pay for the cost of the OTC COVID test.  As a result, the guidance indicates that a health insurance carrier/plan can require a participant and their dependents (if any) that purchases an OTC COVID test to submit a “health claim” through the normal channels for submitting “health claims” to the carrier/plan, and the carrier/plan will then reimburse the participant and their dependents (if any) for the cost of the test.  Alternatively, a carrier/plan can pay for the COVID test directly to the pharmacy or retailer that sold the test.
  • In general, carriers and plans must pay the full cost of the COVID test regardless of whether the test was purchased from (1) an in-network pharmacy or direct-to-consumer shipping program or (2) an out-of-network pharmacy or non-preferred retailer (but see the below “DOLLAR LIMIT SAFE HARBOR”).
  • In general, regardless of whether a COVID test was purchased (1) to “individually” find out if a participant/dependent is COVID positive or (2) because a physician ordered the test as being “medically appropriate,” there are no limits on how many tests a participant and their dependents (if any) can purchase (but see the below “TEST LIMIT SAFE HARBOR”).

DOLLAR LIMIT SAFE HARBOR – Pay attention to guidance coming from your health insurance provider because:

  • If – and only if – an insurance carrier or self-insured plan pays the full cost of the test directly to an in-network pharmacy or a direct-to-consumer shipping program, the carrier and plan are only required to pay a non-preferred (i.e., out-of-network) pharmacy or retailer $12 per test.
  • This also means that if a carrier and plan does not pay for the full cost of the test directly to an in-network pharmacy or a direct-to-consumer shipping program, then there is no dollar limit on the cost of a test purchased from an out-of-network pharmacy or non-preferred retailer (because in this case, the carrier/plan failed to satisfy this “Safe Harbor”).. 
  • The guidance further explains that if a carrier or plan is unable to pay an in-network pharmacy or a direct-to-consumer shipping program directly (because, for example, there are NO COVID tests available due to a shortage of COVID tests), then again, there is no dollar limit on the cost of a test purchased from an out-of-network pharmacy or non-preferred retailer (because again, in this case, the carrier/plan failed to satisfy this “Safe Harbor”).
  • Note, this “DOLLAR LIMIT SAFE HARBOR” does not extend to COVID tests that are ordered by a physician as being “medically appropriate.”  As a result, there is no dollar limit that can be placed on these “medically appropriate” tests even if a carrier/plan satisfies this “Safe Harbor.”

The “TEST LIMIT SAFE HABOR”:

  • A carrier or plan is only required to pay for up to 8 tests per participant and also their dependents (if any) over a 30-day period (so, for a family of 4, a carrier/plan is required to pay for up to 32 tests purchased by the participant/dependents during a month). 
  • Note, similar to the above, this “TEST LIMIT SAFE HABOR” does NOT extend to COVID tests that are ordered by a physician as being “medically appropriate.”  As a result, there is no limit that can be placed on these “medically appropriate” tests.

There will be a lot more coming on this topic over the next days and weeks, including a possible lawsuit seeking that the rule and guidance be overturned.  As always, SBAM will stay on top of this for our members.

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