Updated May 19, 2020 with new IRS guidance on the ability for HDHPs to provide COVID-19 testing and treatment, and telehealth services.
Updated April 13, 2020 with additional guidance released to by the Department of Labor (DOL), Health and Human Services (HHS) and the Treasury.
Congress recently passed the Families First Coronavirus Response Act (“FFCRA”) and the Coronavirus Aid, Relief, and Economic Security Act (“CARES”) in response to the coronavirus (COVID-19) pandemic. This article outlines the impact of the FFCRA and CARES Act on health and welfare plans, reviews the amendments that employers may need to make to their plan documents, and discusses best practices for notifying employees of the changes. The FFCRA and CARES Act implement changes to all health and welfare plans, including the following:
- Requires all group health plans to provide COVID-19 testing and the associated health care visit for free (includes fully-insured, level-funded, and self-insured plans).
- Requires group health plans to provide preventative COVID-19 treatment without cost-sharing once a treatment is available and recommended by the appropriate federal agencies.
- Allows high deductible health care plans (HDHPs) to offer all telehealth services (even services unrelated to COVID-19) without a deductible or with a low deductible until December 31, 2021.
- Allows HSAs, FSAs, and HRAs to reimburse expenses for over-the-counter medicine (including menstrual products) purchased after December 31, 2019.
FFCRA and CARES Act Changes to Group Health and Cafeteria Plans
1. Waiver of Out-of-Pocket Costs for COVID-19 Testing
The FFCRA requires that all group health plans (including fully insured, self-insured, and grandfathered plans) provide coverage for COVID-19 testing and the associated provider, urgent care, or emergency visit (including telehealth visits and COVID-19 drive through testing centers) associated with the testing to plan participants without cost-sharing (including deductibles, co-payments, and coinsurance) or any pre-authorization requirements.
This requirement took effect on March 18, 2020, which was the date the FFCRA was passed, and continues for the duration of the COVID-19 public health emergency. Some health plans may have been required to provide free testing prior to March 18, 2020 pursuant to an applicable state order. For more on the state orders for free COVID-19 testing, see our blog article.
On March 27, 2020, the CARES Act expanded the applicable COVID-19 tests that group health plans must provide for free to include:
- tests that are approved by the Food and Drug Administration (FDA);
- tests that developers intend to request emergency authorization by the FDA;
- tests that are authorized by a state; and
- other tests the Secretary of Health and Human Services deems appropriate.
Note: The IRS has confirmed that HDHPs, which are generally prohibited from providing benefits before an individual’s deductible is met, are permitted to provide benefits associated with the testing and treatment of COVID-19 without a deductible, or with a deductible below the minimum deductible for an HDHP. This applies to expenses incurred on or after January 1, 2020. For more, see IRS Notice 2020-29 and IRS Notice 2020-15 on HDHPs and Expenses Related to COVID-19.
Reimbursement for COVID-19 Testing: The CARES Act also requires group health plans to reimburse providers for the COVID-19 testing based on their negotiated rate, if a rate was in place before the COVID-19 public health emergency. If no such negotiated rate was in place, group health plans are required to reimburse providers based on the rate published on the provider’s website (which providers are required to post). Employers with self-insured healthcare plans should be aware of the required reimbursement rates for COVID-19 testing when administering their plan.
Required Plan Amendments and Notice Requirements: Employer healthcare plans must provide for any COVID-19 testing and associated provider visit for free after March 18, 2020, or any earlier date required under an applicable state order. Accordingly, employer plan documents that describe the benefits that are covered under the plan (i.e. the insurance carrier’s evidence of coverage “EOC” or summary plan description “SPD”) may need to be amended to reflect this new benefit. Carriers may be working to automatically amend their EOCs to reflect this required change.
Generally, employers have 210 days after the end of the plan year to distribute any “material modifications” to their plans. If a “material modification” affects the content of an employer’s Summary of Benefits and Coverage (SBC), they must provide 60 day advance notice of the change. However, the DOL announced in recently released guidance that they will not enforce this 60 day advance notice requirement. Rather, in this circumstance, an employer should provide notice as soon as “reasonably practicable.”
As such, in order to fulfill their legal obligation, employers would be expected to re-distribute carrier EOCs explaining these changes within the time limit (which could mean next year). Regardless of the legal requirement, employers will want to notify their employees of these changes as soon as possible so they are aware of their plan benefits.
2. COVID-19 Preventative Services and Vaccines Without Cost Sharing (Once Available)
The CARES Act requires all group health plans to provide qualifying COVID-19 preventative services for free after a treatment becomes available, as recommended by the United States Preventative Services Task Force or the Advisory Committee on Immunization Practices of the Centers for Disease Control. Group health plans must provide the preventative treatments within 15 days of such recommendation. Qualifying preventative services may include items, services, or immunizations intended to prevent or mitigate COVID-19.
Required Plan Amendments: Employer healthcare plans must provide for the COVID-19 preventative services and their plan documents must be amended accordingly, as discussed in the above section.
3. Telehealth and HDHPs
The CARES Act permits HDHPs to provide telehealth services (even those unrelated to the testing or treatment of COVID-19) without a deductible, or with a deductible below the minimum deductible until December 31, 2021. On May 12, 2020, the IRS released Notice 2020-29, which clarified that this CARES Act provision applies to telehealth services provided on or after January 1, 2020, with respect to plan years beginning on or before December 31, 2021. This provision means that individuals can receive free or low deductible telehealth services without jeopardizing their Health Savings Account (HSA) eligibility.
The CARES Act allows, but does not require, HDHPs to provide free telehealth services. Employers with self-insured HDHP plans have the option of amending their plan to provide some, or all, covered telehealth services to their plan participants with little or no deductible. Employers with fully insured HDHP plans have less discretion to do this, as their HDHP carrier ultimately has the power to decide whether to provide free telehealth services. Employers will want to discuss these options with their insurance providers.
Required Plan Amendments: If the employer’s HDHP provides telehealth services with a lower (or no) deductible, the employer should amend their HDHP plan documents to reflect these changes. Self-insured employers (or their third-party administrator) will have to amend their plan documents, whereas carriers may automatically amend the applicable plan documents for fully insured employers. The amendments should include the new deductible (if any) for telehealth services, which telehealth services are subject to the new deductible, and how long these changes will last. Again, employers do not have to amend their plan documents immediately (they have 210 days after the end of their plan year to do so) but should communicate these changes to their employees as soon as possible.
4. Reimbursement of over-the-counter medicine, including menstrual products
The CARES Act eliminates the requirement under Section 9003 of the Affordable Care Act that only permitted HSAs to reimburse medicine or drugs that were prescribed by a doctor. The Act now permits HSAs, FSAs, and HRAs provide reimbursement for over-the-counter (OTC) medicine, including menstrual care products, without a prescription. This provision is effective for expenses incurred after December 31, 2019 (with no expiration).
Required Plan Amendments: Employers have discretion on whether to include the new permitted reimbursements in their HSA, FSA, and/or HRA plans. If the employer decides to allow their plan to reimburse these new permitted items, the employer should amend their applicable Cafeteria Plan documents to allow for this as soon as possible. Generally, plan amendments are effective prospectively; however, since the permitted reimbursements can be effective as of January 1, 2020, employers may be able to make this amendment apply retroactively (the IRS has not explicitly permitted this retroactive amendment). The IRS may provide additional guidance on retroactive amendments later in the year.
Employers should reach out to any program vendors to see whether they will assist with any needed Cafeteria Plan amendments. Some vendors are providing employers with template amendments.
It is important to note that if employers amend their FSA plan to allow for the reimbursement of OTC medicine, this would not trigger a “qualified life event” that would allow employees to change their FSA election.
Notifying Employees of Group Health Plan Changes
Generally, employers must notify employees of any “material modification” to their healthcare plans within 210 days after the end of the plan year in which the modification is adopted. However, if the “material modification” affects the content of an employer’s SBC, the employer must provide 60 day advance notice of the change. Since the DOL announced non-enforcement of this 60 day advance notice requirement, employers should provide notice as soon as “reasonably practicable” for changes that affect their SBC.
Although employers are generally not legally required to notify their employees of plan changes until 210 days after the end of the plan year, it is best practice for employers to inform employees of any changes as soon as possible so they can take advantage of the new benefits. In addition, it is best practice for employers to inform their employees if they decide to allow for the OTC reimbursements through their FSA, HSA, and/or HRA plans. Employers should clearly communicate any new benefits to employees given the heightened concern for health and wellbeing during this time.
- It is best practice for employers to communicate any healthcare plan changes provided under the FFCRA and the CARES Act to their employees as soon as possible so employees understand what benefits are available.
- Employers should ensure their healthcare plans are amended to include the required CARES Act provisions within 210 days after the end of their plan year (which may be done via an updated EOC from their insurance carrier).
- Employers should update their Cafeteria Plans as soon as possible if they would like to adopt the permitted reimbursements for OTC medication. Employers may want to reach out to their plan vendors for assistance.
- DOL, HHS and Treasury FAQs on the FFCRA and CARES Act
- IRS Notice on HDHPs and Expenses Related to COVID-19
- IRS Notice 2020-29: Clarification on HDHPs, COVID-19 Testing, and Telehealth Services
- Wavier of Out-of-Pocket Costs for COVID-19 Testing
- The Coronavirus Aid, Relief, and Economic Security (CARES) Act
- The Families First Coronavirus Response Act
The information and materials on this blog are provided for informational purposes only and are not intended to constitute legal or tax advice. Information provided in this blog may not reflect the most current legal developments and may vary by jurisdiction. The content on this blog is for general informational purposes only and does not apply to any particular facts or circumstances. The use of this blog does not in any way establish an attorney-client relationship, nor should any such relationship be implied, and the contents do not constitute legal or tax advice. If you require legal or tax advice, please consult with a licensed attorney or tax professional in your jurisdiction. The contributing authors expressly disclaim all liability to any persons or entities with respect to any action or inaction based on the contents of this blog.