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 February 4, 2022, the Departments of Labor, Health and Human Services, and the Treasury (the Departments) issued another set of 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 (Part 51). On February 4, 2022, the Departments issued additional FAQs (Part 52).
Beginning with tests purchased on or after January 15, 2022, group health plans are 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. Part 51 provides for two safe harbors:
The Departments issued Part 52 to address questions around the safe harbors above.
Part 52 provides flexibility for plans in how they provide access to tests under the direct coverage safe harbor. At a minimum, tests should be made available with no up-front participant cost sharing through at least one direct-to-consumer shipping mechanism and one in-person mechanism. Plans do not necessarily need to provide access to all OTC COVID-19 tests that are approved, cleared, or authorized for use by the FDA within the direct coverage program, but still must cover all approved tests purchased outside of the program. The $12 maximum reimbursement would be permitted to apply to such tests.
In addition, a direct-to-consumer shipping program should allow an individual to place an order for OTC COVID-19 tests to be shipped to them directly. However, the direct-to-consumer shipping program does not have to be exclusive nor separate from the in-person mechanism. For example, if retailers covered under the direct in-person coverage maintain online platforms where individuals can order tests to be delivered to them, this is considered direct-to-consumer shipping.
Part 52 further notes that:
Note that the above guidance is prospective and effective February 4, 2022.
Part 52 clarifies the Departments' guidance, allowing a plan to take reasonable steps to prevent, detect, and address fraud and abuse. Part 52 provides that plans can exclude coverage for tests purchased through a person-to-person sale or an online auction or resale marketplace. If the plan were to limit channels through which reimbursement will be provided, it must provide information on which retailers are covered and general information around which types of resellers are not covered.
Part 52 also clarifies what is meant by OTC COVID-19 test for purposes of this guidance. The OTC COVID-19 tests must be approved, cleared, or otherwise authorized by the FDA to be completely used and processed without the involvement of a laboratory or a healthcare provider for Part 51 and Part 52 to apply. If Part 51 and Part 52 are not applicable to a COVID-19 test that can be purchased directly by the consumer, then the test would still need to be covered when ordered by an attending healthcare provider, in accordance with prior guidance.
Furthermore, Part 52 clarifies that, because the plan is required to reimburse participants for the cost of an OTC COVID-19 test, the reimbursable cost from the plan cannot also be reimbursed by a health flexible spending arrangement (FSA) or health reimbursement arrangement (HRA). For similar reasons, reimbursable testing costs paid for by the plan are not considered a qualified medical expense under a health savings account (HSA).
Plan sponsors will need to consider several things as they work to become compliant with the additional guidance issued in Part 51 and Part 52. The most important items to consider immediately are as follows: