Plan Sponsor Considerations for OTC-COVID 19 Tests Coverage

January 26, 2022

On January 10, 2022, guidance was released requiring group health plans and insurers to cover over-the-counter (OTC) COVID-19 diagnostic tests for members without cost sharing or prior authorization. This coverage began on January 15, 2022, creating challenges for all parties in implementing the processes necessary for compliance. The directive allows members with private insurance to purchase COVID-19 tests at the pharmacy, a retailer, or online and have them paid for by submitting a claim to the insurer or plan for reimbursement or paid for directly (direct coverage). Although not required, the guidance “strongly encourages” insurers to provide direct access avoiding the need for members to seek reimbursement. The following article provides additional clarification regarding the Biden Administration’s directive.

PSG offers the following comments and considerations to its plan sponsor clients.



Cost Containment Considerations

The basic coverage requirements offer little cost containment protection to plans against potential abuse of the benefit. However, two safe harbor provisions allow plans to implement limitations if certain conditions are met.


Reimbursement and Quantity Safe Harbor

  • Plans can establish a pharmacy/provider network and, in that scenario, limit the reimbursement for tests purchased from out-of-network pharmacies/providers to $12 or the actual price, whichever is lower. To satisfy this safe harbor, plans must ensure there is adequate in-network access to OTC COVID-19 tests and must implement the system changes necessary to process payment to the pharmacy or retailer directly, so there is no upfront cost to the member.
  • Plans may also set a limit of no more than eight tests per 30-day period (or calendar month) per member for tests that do not involve a provider. These limits do not apply to tests ordered or administered by healthcare providers. The FAQ states plans must provide coverage for OTC COVID-19 tests in a “manner that is otherwise consistent” with the requirements of the guidance. These requirements include not denying coverage or imposing cost sharing with respect to any OTC COVID-19 tests for covered members that meet the statutory criteria. Note that a plan is not required to support direct provider reimbursement to qualify for this safe harbor.


Implementing the safe harbor provisions under the specified conditions can facilitate member access and provide plan sponsors with some control over unlimited testing. The reimbursement safe harbor only affords protection if adequate access is determined, but the FAQ does not define “adequate access.”  Due to the scarcity of OTC COVID-19 tests, plans must be diligent in assessing access and availability within preferred networks so that quantity limits on tests can be applied.



Network Setup Considerations

Evaluating options and setting up a managed benefit can be advantageous to plan sponsors as it can reduce potential abuse of the benefit, as noted in the safe harbor above. PBMs are understandably quickly reacting to the guidance, and information is constantly evolving. PBM’s communicated initial approaches to operationalizing this directive, but it is expected that insurers, health plans, and PBMs will continue to build out strategies. Clients should work to ensure they are aware of the current and future state of the programs.

  • While adopting a network of pharmacies/providers can provide some cost containment protection, clients should be aware of the possible additional fees. Early indications from the PBMs are that additional fees will be charged for services such as claims adjudication, program enrollment fees, and claims submission processes. PSG is working with PBMs to gather this information and make it available to our clients.
  • PSG recommends clients critically evaluate which benefit, pharmacy or medical, the tests are covered. The process for members can be simplified if only one benefit is selected. Additionally, it may be difficult to take advantage of the quantity limit on tests available when covered under separate benefits.
  • PSG will work with clients and their vendors to evaluate the fraud, waste, and abuse tracking and prevention services and reporting offered. Monitoring for diversion, excessive dispensing, and egregious costs should be conducted and reported.
  • Ensure the vendor can implement the allowed quantity restrictions (eight tests per 30-days or calendar month). This should include the ability to delineate packaging that includes more than one test.
  • Confirm vendor supports coding to cover only FDA-approved OTC tests and excludes potential fraudulent tests.



Member Experience Considerations

The COVID-19 pandemic has been extremely challenging for employees and their families. Convenient access to testing can reduce some of those challenges and the spread of infection. Consequently, we encourage clients to consider the following as they implement testing strategies:

  • The direct coverage strategy is a provision to qualify for the safe harbor and offers member convenience versus a more cumbersome member reimbursement process. However, plans can opt not to adopt the direct coverage strategy and only offer member reimbursement.
  • Consider the providers within the preferred networks, including traditional and online providers. By increasing availability through multiple channels, your benefit design would support the “adequate access” safe harbor provision and improve service to members.
  • Ensure members are provided with information aligned with FDA guidance, including procuring and seeking reimbursement on tests; proper use; explaining the reliability of testing results; and expiration considerations.
  • Consider the ability of vendors to handle the expected increase in customer service inquiries. As these are member service calls, we recommend that they be included in existing performance guarantees but should be validated with the PBM.
  • Should a member reimbursement strategy be used, ensure vendors support a reasonable turnaround time for members to receive reimbursement for tests.
  • Evaluate the process members must follow to submit direct claims to ensure a positive member experience.




Fact Sheet: The Biden Administration to Begin Distributing At-Home, Rapid COVID-19 Tests to Americans for Free, January 14, 2022. Accessed January 15, 2022.

Biden-Harris Administration Requires Insurance Companies and Group Health Plans to Cover the Cost of At-Home COVID-19 Tests Increasing Access to Free Tests, January 10, 2022. Biden-Harris Administration Requires Insurance Companies and Group Health Plans to Cover the Cost of At-Home COVID-19 Tests, Increasing Access to Free Tests |  Accessed January 15, 2022.




PSG offers this material for general information only. PSG does not intend this material to be, nor may any person receiving this information construe or rely on this material as, tax or legal advice. The matters addressed in this document and any related discussions or correspondence should be reviewed and discussed with legal counsel prior to acting or relying on these materials.