On March 27, 2020, President Trump signed the largest economic stimulus bill in U.S. history: the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).  In this blog article, we take a closer look at the provisions affecting health and welfare plans.

Coverage of COVID-19 Tests and Associated Visits

Starting April 2, 2020, the Families First Coronavirus Response Act (the “FFCRA”) requires group health plans and health insurance issuers to cover, without cost-sharing or preauthorization requirements:

  • in vitro diagnostic tests for detection of SARS-CoV-2 or diagnosis of the virus that causes COVID-19,
  • administration of the tests, and
  • any health care provider visits related to the tests.

Under the FFCRA, the test must be approved by the Food and Drug Administration (the “FDA”).  Section 3201 of the CARES Act expands this coverage requirement to include tests:

  • for which developers have requested or intend to request emergency use authorization from the FDA,
  • that have been developed in and authorized by states, or
  • that the Secretary of Health and Human Services determines appropriate in guidance.

It appears that the costs of the tests and associated visits must be covered without cost-sharing or preauthorization requirements regardless of whether they are provided by in-network or out-of-network providers.  In contrast, the Patient Protection and Affordable Care Act (the “ACA”) requires preventive care items or services to be covered without cost-sharing only when they are provided by in-network providers and permits the use of preauthorization requirements and other medical management techniques.

To address some of the uncertainty surrounding the amount plans will have to pay the provider of a covered test, Section 3202 of the CARES Act establishes reimbursement rate policies for diagnostic tests and requires providers of diagnostic tests to post the cash price on the provider’s website.  If a health plan or health insurance issuer had a negotiated rate in effect with a provider before January 31, 2020, that negotiated rate will apply.  In the absence of a pre-existing negotiated rate, the health plan or health insurance issuer must either reimburse the cash price listed by the provider on a public internet website or negotiate a different rate for a lesser price.

Faster Coverage of COVID-19 Preventive Items and Services

The CARES Act requires group health plans and health insurance issuers offering group or individual health insurance coverage to cover any qualifying coronavirus preventive item, service, or immunization within 15 days after the date the appropriate agency recommends that it be so classified.  In contrast, the ACA normally allows health plans and issuers a grace period of at least one year after a recommendation is issued before requiring coverage of the recommended item or service without cost-sharing.

Under the CARES Act, a qualifying coronavirus preventive item, service, or immunization includes:

  • like under the ACA, an evidence-based item or service that has in effect a rating of “A” or “B” in the current recommendations of the United States Preventive Services Task Force, and
  • unlike under the ACA, an immunization that has in effect a recommendation from the Advisory Committee on Immunization Practices for a particular individual.

If guidance (which has not yet been issued) applies the ACA’s normal rules for coverage of preventive items and services, any qualifying coronavirus preventive item, service, or immunization would be required to be covered without cost-sharing only when provided by an in-network provider and could be subject to reasonable medical management techniques (such as preauthorization requirements).

Pre-Deductible Payments Permitted for Certain Services under High Deductible Health Plans

The FFCRA requires high-deductible health plans (“HDHPs”) to cover the full cost of telemedicine visits that result in an order for, or administration of, COVID-19 testing. Section 3701 of the CARES Act further expands telehealth coverage by temporarily permitting (but not requiring) a HDHP with a health savings account (“HSA”) to cover telehealth services without cost-sharing prior to a participant reaching the deductible, regardless of whether the service results in a participant receiving a COVID-19 test (or an order for the test).  The CARES Act provision is in effect only for plan years beginning on or before December 31, 2021.

As discussed in a previous blog article, the Internal Revenue Service has issued guidance (Notice 2020-15) that allows HDHPs to reimburse up to the full cost of medical care services (not limited to telehealth services) and items for testing and treatment of COVID-19 before plan participants meet the plan’s minimum statutory deductible.  The IRS guidance remains in effect until further guidance is issued.

These statutory and regulatory provisions effectively allow participants in a HDHP that waives cost sharing or deductibles for medical expenses related to the testing and treatment of COVID-19 to continue to be eligible to receive favorable federal tax treatment for amounts contributed to their HSAs.

Plan documents may need to be amended to reflect changes on account of these developments.

Pre-Tax Purchases of Over-the-Counter Medical Products

Section 3702 of the CARES Act allows funds in HSAs, Archer MSAs (as defined in section 220 of the Internal Revenue Code (the “Code”)) and health flexible spending accounts to be used for the purchase of over-the-counter medicines and drugs without a prescription from a physician and for the purchase of menstrual care products.  Since the enactment of the ACA, funds in these accounts could not be used to reimburse over-the-counter medicines or drugs (other than insulin) unless the medicine or drug was prescribed.  The CARES Act would repeal this restriction, effective for expenses incurred after December 31, 2019.  

Plan sponsors that wish to allow health flexible spending accounts to reimburse over-the-counter medicines and drugs and/or menstrual care products may wish to consult their plan administrators to determine the earliest date that the administrator can accommodate the change.  In addition, plan sponsors should review plan documents to determine whether any amendments are needed.  The IRS has not yet issued guidance on the deadline for making any such plan amendments.

Relaxed Enforcement of HIPAA Privacy Provisions

Section 3224 of the CARES Act requires the U.S. Department of Health and Human Services (“HHS”) to issue guidance within 180 days regarding the sharing of protected health information (“PHI”) during the COVID-19 public health emergency.  HHS appears to be moving incrementally as it seeks to balance privacy concerns and the need to take unprecedented actions to stem the COVID-19 pandemic.  As described in a previous blog article, over the past month, HHS initially issued guidance waiving enforcement of certain provisions of the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) to:

  • allow health care providers to use non-public facing audio or video applications to assess and treat patients during the COVID-19 public health emergency; and
  • waive sanctions and penalties in specified circumstances for hospitals that do not comply with certain provisions of the Privacy Rule issued under HIPAA (g., the requirement to distribute a notice of privacy practices).

Most recently, as discussed in Covington’s Digital Health blog article, on April 2, 2020, HHS issued a Notification of Enforcement Discretion declaring that it would not impose penalties for violations of certain provisions of the HIPAA Privacy Rule by business associates (such as third-party administrators or insurers of employer-sponsored health plans) during the COVID-19 public health emergency. More specifically, HHS will not impose penalties with respect to uses or disclosures of PHI for COVID-related public health activities or health oversight activities, even if the business associate agreement would not otherwise permit that use or disclosure.  To avoid penalties, the business associate would be required to inform the covered entity (e.g., the health plan) within 10 calendar days after the use or disclosure occurs (or begins).  HHS noted that its enforcement discretion does not affect potential contractual liability between the covered entity and the business associate.

Employer Payments of Employee Student Loan Debt

Section 2206 of the CARES Act amends Section 127 of the Code to permit employers to make tax-free payments of up to $5,250 to, or on behalf of, employees for student loan debt.  Payments of principal and interest, whether made to a lender or an employee, on a qualified education loan (as defined in Section 221(d) of the Code) before January 1, 2021, would be excluded from the employee’s income and not subject to employment taxes. Any student loan payments for employees will need to be provided under a written plan that meets the requirements of Section 127 of the Code.

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Photo of Kendra L. Roberson Kendra L. Roberson

Kendra Roberson has experience advising clients on a broad spectrum of employee benefits matters including tax-qualified retirement plans, employee stock ownership plans, executive compensation arrangements, stock option and other equity-based compensation plans, cafeteria plans, VEBAs, self-insured medical plans, and other health and welfare…

Kendra Roberson has experience advising clients on a broad spectrum of employee benefits matters including tax-qualified retirement plans, employee stock ownership plans, executive compensation arrangements, stock option and other equity-based compensation plans, cafeteria plans, VEBAs, self-insured medical plans, and other health and welfare plans.  Her experience includes plan design and drafting, regulatory compliance, ERISA litigation, and handling employee benefits matters and plans in corporate transactions.  In addition, Ms. Roberson has extensive experience advising employers and state governments on compliance with the Patient Protection and Affordable Care Act (“PPACA”).

Photo of Sarah Friedman Sarah Friedman

Sarah Friedman helps clients navigate the complex regulatory requirements of ERISA, the Internal Revenue Code, and other applicable federal and state or local laws. Her practice covers all aspects of tax-qualified retirement plans, health and welfare plans, and executive compensation.