A Closer Look: Other CARES Act Provisions Affecting Health Plans

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Background

The Coronavirus Aid, Relief, and Economic Security Act (CARES Act) became law on March 27, 2020, and made a number of changes for health plans in relation to the COVID-19 pandemic, including expanding the requirement to cover COVID-19 diagnostic testing (discussed separately), requiring coverage of COVID-19 preventive treatment within 15 days of an administrative recommendation, and adding a temporary safe harbor for high deductible health plans (HDHPs) to cover telehealth services. The CARES Act also expands the categories of medical expenses that are eligible for reimbursement for account-based medical plans.

On April 11, 2020, the U.S. Departments of Labor, Health and Human Services, and the Treasury (together, Departments) jointly released frequently asked questions (FAQs) regarding the implementation of the health coverage provisions of the Families First Coronavirus Response Act (FFCRA) and the CARES Act. 

15-Business-Day Coverage Window for New Preventive Services

Group health plans that are not grandfathered under the Patient Protection and Affordable Care Act (ACA) are obligated to cover both evidence-based items and services with ratings of "A" or "B" and immunizations with recommendations from the Advisory Committee on Immunization Practices. The ACA added this requirement to Section 2713 of the Public Health Service Act. Under the ACA, plans normally have a year or more to implement newly recommended preventive services.

The CARES Act directs the Departments to require group health plans and issuers of group and individual policies to cover any "qualifying coronavirus preventive service" without cost-sharing. A "qualifying coronavirus preventive service" includes an item, service, or immunization intended to prevent or mitigate the coronavirus disease and that is:

• An evidence-based item or service that has in effect a rating of "A" or "B" in the current recommendations of the U.S. Preventive Services Task Force; or
• An immunization that has in effect a recommendation from the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention with respect to the individual involved.

The effect of the new requirement is to clarify that health plans must cover these services within 15 business days (not one year or longer as with other preventive services under the ACA) after the date a recommendation is made if the services are intended to prevent or mitigate coronavirus. This means that health plans must stay alert and informed throughout the COVID-19 public health emergency, as preventive services can be expected to receive approval on a rolling basis as new evidence emerges.

The ACA regulations permit a plan that has a network of providers to limit first dollar coverage of preventive services to in-network coverage only. This rule should apply to coverage of qualifying coronavirus preventive services as well, unless the circumstances are such that obtaining coverage for these services is so difficult that limiting the coverage to in-network providers creates access issues. We believe that specific guidance would be necessary to specifically extend this coverage out-of-network.

Promotion of Telehealth

The FAQs include a strong emphasis on telehealth. The Departments noted that, by using telehealth, "patients are able to seek treatment from a healthcare professional in their home, without having to go to a medical office or hospital, helping minimize the risk of exposure to and community spread of COVID-19." The Departments strongly urge plans to promote the use of telehealth and other remote care services by "ensuring access to a robust suite of telehealth and other remote care services, including mental health and substance abuse disorder services, and by covering telehealth and other remote care services without cost-sharing or other medical management requirements."

Employers should use caution if they consider implementing a full-scale telehealth program for all employees outside of their group health plan. Such a program could be subject to the full range of requirements under ERISA, the ACA, and other employee benefit laws.

Temporary Safe Harbor for HDHP Coverage of Telehealth and Remote Services

Individuals who contribute to health savings accounts (HSAs) must be covered by an HDHP and cannot be covered by any plan that is not an HDHP and that also covers any benefit covered by the HDHP. A plan is not an HDHP if it provides coverage for services without a high deductible, with specified exceptions including preventive care. This would normally prevent an HDHP from paying for telehealth services prior to the time an individual satisfies the plan's deductible.

The CARES Act provides a temporary safe harbor for HDHPs to cover "telehealth and other remote care services" without a deductible. The relief applies March 27, 2020, and extends through plan years that begin on or before December 31, 2021. Telehealth visits do not have to be connected with COVID-19 to be eligible for this relief. This change is statutory and follows sub-regulatory guidance from the Internal Revenue Service in Notice 2020-15 that allowed testing and treatment for COVID-19 to be covered under HDHPs without a deductible. 

Accordingly, beginning March 27, 2020, participants covered by an HDHP that provides first-dollar coverage for telehealth and remote care services will not lose their eligibility to contribute to HSAs through plan years beginning on or before December 31, 2021.

Expansion of Qualified Medical Care for HSAs, FSAs, HRAs, and Archer MSAs

The CARES Act expands the types of medical care individuals may purchase with funds from HSAs, FSAs, HRAs, and Archer medical savings accounts to include (1) menstrual care products and (2) over-the-counter medicines and drugs. These changes are effective for expenses incurred and for amounts paid after 2019. The CARES Act does not contain an expiration date for this change, so it appears to be permanent.

Funds in these account-based plans may be used only for "qualified medical expenses," which include amounts paid for medical care under IRC § 213(d). Prior to the CARES Act, "qualified medical expenses" included amounts paid for medicines or drugs only if the medicine or drug was prescribed or was insulin. The CARES Act eliminates the requirement that the medicine or drug be prescribed. This reverses a restriction imposed by the ACA and once again allows over-the-counter medicines and drugs to be reimbursed from these account-based plans.

The CARES Act also clarifies that "qualified medical expenses" include "menstrual care products," which include tampons, pads, liners, cups, sponges, and similar products used for similar purposes.

Most employers will need to amend their FSA and HRA plan documents to allow for the reimbursement of these expenses. Many plan documents specifically excluded over-the-counter drugs (and never included menstrual products) from the definition of medical expenses eligible to be reimbursed under FSAs and HRAs. Those specific exclusions will need to be removed.

Although the effective date of this provision is January 1, 2020, FSAs may only be amended prospectively, thus it appears that over-the-counter medicines and drugs and menstrual products may not be eligible for reimbursement from FSAs until plan documents are amended to include them in eligible medical expenses.

This expansion allowing coverage of over-the-counter medicine and drugs and menstrual products does not trigger an election change under an FSA allowing an individual to increase an elected contribution to an FSA. The rules under IRC § 125 allowing election changes when coverage is increased under a qualified benefit do not apply to FSAs. On the other hand, those rules do allow prospective election changes to HSAs at any point in the plan year. As a result, HSA participants may wish to increase HSA contributions in response to this expanded coverage.

For more information about the employee benefit implications of the COVID-19 pandemic and how they might affect your employee benefit plans, please contact any one of Ice Miller's Employee Benefits attorneys. Please contact our COVID-19 Task Force if you have any questions about managing the risks of the coronavirus pandemic. Also see our Coronavirus (COVID-19) Resource Center for additional resources, which is updated daily.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.