New Guidance for Employer Requirement to Pay for At-Home COVID Tests

New Biden administration guidance clarifies certain COVID tests are not reimbursable, addresses supply shortage issues, and gives employers greater flexibility to provide COVID tests.

Background: The January 10, 2022, guidance allowed employer health plans to cover the cost of OTC at-home COVID tests by arranging for "direct coverage" of the tests (i.e., no up-front out-of-pocket cost to the plan participant) through a pharmacy network and a direct-to-consumer shipping program, and/or by arranging for plan participants to seek reimbursement from their employers post-purchase. Employers that set up direct coverage programs may limit reimbursement for OTC tests from non-preferred pharmacies or other retailers to $12 per test.

New guidance provides greater employer flexibility: Employers may provide “direct coverage” through several different mechanisms, such as a direct-to-consumer shipping program or at in-person locations, including independent distribution sites set up by, or on behalf of, an employer plan.

Employee communication stressed in the guidance: Employers should ensure that employees are aware of the key information needed to access COVID tests, such as which tests are available, if the plan offers different mechanisms for obtaining tests, and which tests are available under each mechanism.

Employers must pay shipping costs: When providing COVID tests through a direct-to-consumer shipping program, employers must cover reasonable shipping costs in a manner consistent with other items or products provided by the plan or issuer via mail order.

Supply shortage issues addressed: If an employer's direct coverage program is temporarily unable to provide adequate access to COVID tests due to supply shortages, the employer plan will not be out of compliance and can still limit reimbursement of tests purchased outside of the direct coverage program to $12 per test.

New fraud and abuse guidance: Employers may take reasonable steps to prevent fraud by limiting coverage to tests purchased from established retailers that would typically be expected to sell OTC COVID tests.

Certain COVID tests are not reimbursable: Tests that use a self-collected sample but require processing by a laboratory to return results are not covered. Only tests that can be obtained without a prescription and used without the involvement of a third party are covered.

Impact on FSAs and HRAs: An individual cannot be reimbursed more than once for the same medical expense. Therefore, the cost of OTC COVID tests paid or reimbursed by a plan cannot be reimbursed by a health FSA or HRA.

Outlook: The Biden administration may issue additional guidance in the future.