Parametric insurance: A captivating solution
Parametric policies, which pay based on the magnitude of an event, can bridge coverage gaps that are difficult to insure with a traditional indemnity policy.
On January 10, 2022, the Departments of Labor, Health and Human Services (HHS), and the Treasury (the Departments) issued FAQs pertaining to the coverage of COVID-19 self-administered or at-home tests (OTC COVID-19 tests) without an order or individualized clinical assessment by an attending healthcare provider.
The intent of this Benefits Update is to provide plan sponsors with information regarding the coverage requirements for OTC COVID-19 tests.
In March 2020, both the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act were enacted. These Acts contained requirements pertaining to COVID-19 testing coverage for group health plans and health insurance issuers. On January 10, 2022, the Departments issued further guidance through a set of FAQs pertaining to coverage of OTC COVID-19 tests.
Beginning with tests purchased on or after January 15, 2022, group health plans will be required to cover available OTC COVID-19 tests without an order of individualized clinical assessment by a healthcare provider, provided the particular test’s authorization, clearance, or approval by the U.S. Food and Drug Administration (FDA) does not require such order. Plans must cover such tests without any participant cost sharing, preauthorization, or medical management, similar to how plans have been covering COVID-19 tests when the tests are ordered by an attending healthcare provider. Plans have the option to choose to cover tests that were purchased prior to January 15, 2022.
The FAQs do reiterate that COVID-19 tests (including OTC COVID-19 tests) for purposes not primarily intended for individualized diagnosis or treatment of COVID-19 (e.g., for employment purposes, etc.) are not required to be covered.
While the FAQ does not allow a plan to limit coverage to only OTC COVID-19 tests that are provided through preferred pharmacies or other retailers, the Departments provide a safe harbor. The safe harbor relates to plans providing OTC COVID-19 tests by arranging for coverage through the plan’s pharmacy network and a direct-to-consumer shipping program. Under this direct coverage approach, the participant is not required to seek reimbursement of the test costs from the plan. Rather, the plan must make the necessary changes (e.g., systems, technology, billing, etc.) such that the plan pays the test distributor directly. Further, under this direct approach plans must ensure that all participants have adequate access to OTC COVID-19 tests and are aware of details needed to access the OTC COVID-19 tests, such as dates of availability and participating retailers.
If a plan were to establish a direct-to-consumer program through partnership with its in-network pharmacies or other entities, the plan would only be required to reimburse plan participants up to $12 per test for participants who purchase OTC COVID-19 tests on their own outside of the direct-to-consumer arrangement. In these instances, the participant would have to file a claim for reimbursement to the plan.
The FAQs make it clear, however, that if a plan is unable to establish a direct coverage approach, or if there are delays that are significantly longer than the amount of time it takes to receive other items under the plans direct-to-consumer shipping programs (e.g., mail order pharmacy), then the safe harbor would not apply. If a plan cannot rely on the safe harbor, it cannot limit the amount of reimbursement paid to plan participants who obtain OTC COVID-19 tests through channels outside of the direct arrangement.
The FAQs do allow for plans to limit the number of OTC COVID-19 tests without an order or individualized clinical assessment by an attending healthcare provider. The FAQs state that plans may limit the number of tests to eight per covered individual each 30-day period (or calendar month). Plans may not limit the number of tests for a shorter period of time (e.g., only cover four tests over 15 days).
Additionally, the FAQs do permit plans to take action to prevent suspected fraud and abuse. The FAQs outline steps plans may take, such as requiring participant attestation that the test was for personal use and not for employment purposes, or requiring participants to submit proof of purchase along with their reimbursement requests. Plans may not, however, impose on participants multilayered review processes that delay the participant’s reimbursement.
While the FAQs do not make distinctions between insured and self-funded plans, it is our understanding that for insured plans the carrier will be the entity responsible for providing the tests and facilitating reimbursement to plan participants. For self-funded plans, the third-party administrator will be the entity in charge of processing claims for reimbursement.
Plan sponsors will need to consider several things as they work to become compliant with the guidance issued in the FAQs. The most important items to consider immediately are as follows: