CMS Announces Medicare Coverage and Departments Clarify Safe Harbor for Providing Direct Coverage of OTC COVID-19 Tests

On February 3, 2022, the Centers for Medicare and Medicaid (CMS) announced that starting in early spring, people in either Original Medicare or Medicare Advantage will to get up to eight (8) over the counter (OTC) COVID-19 tests per month free of cost. Tests will be available through eligible pharmacies and other participating entities. A separate Alert will be issued once more details are available.

On February 4, 2022, the Departments of Labor, Health and Human Services (HHS), and the Treasury (collectively, the Departments) issued joint FAQs About Families First Coronavirus Response Act and Coronavirus Aid, Relief, and Economic Security Act Implementation Part 52 (“FAQs Part 52”), which provides additional guidance on the safe harbor for direct coverage of over the counter (OTC) COVID-19 tests that was established under Q2 of the FAQs Part 51 issued on January 10, 2022. This Alert summarizes the key provisions of the FAQs Part 52.

Effective Date: The guidance in Q1 of FAQs Part 52 applies prospectively and is effective February 4, 2022.


Section 6001 of the Family First Coronavirus Response Act (FFCRA) requires group health plans to provide benefits for certain items and services related to testing for the detection of COVID-19 or the diagnosis of COVID-19, without imposing any cost-sharing requirements (including deductibles, copayments, and coinsurance), prior authorization, or other medical management requirements through the public health emergency period, which has been extended to April 16, 2022. Section 3201 of the CARES Act amended section 6001 to include a broader range of diagnostic items and services that plans must cover without any cost-sharing requirements, prior authorization, or other medical management requirements.

On June 23, 2020, the Departments issued FAQs Part 43, which stated that plans and issuers are required to cover COVID-19  tests intended for at-home testing, when the test is ordered by an attending health care provider who has determined that the test is medically appropriate for the individual based on current accepted standards of medical practice and the test otherwise meets the statutory criteria under the FFCRA.

FAQs Part 51 expanded coverage to FDA approved self-administered OTC COVID-19 tests. Generally, plans must cover such self-administered OTC COVID-19 tests without imposing any out-of-pocket expense to the participant, beneficiary, or enrollee. Question 2 of FAQs Part 51 established a safe harbor option which allows plans to limit reimbursement for OTC COVID-19 tests from non-preferred pharmacies or other retailers to the lesser of actual price and $12 per test. To qualify for the safe harbor option, a plan or issuer must arrange for direct coverage, i.e., no upfront cost, of OTC COVID-19 tests through both its pharmacy network and a direct-to-consumer shipping program.

See Cheiron’s prior alert, Health Plans Must Cover Cost of OTC Home COVID-19 Tests, for more detailed legislative background and an overview of FAQs Part 51.

In response to numerous questions from stakeholders, the Departments issued FAQs Part 52 to revise and clarify the requirements of the safe harbor and provide plans greater flexibility in how they provide access to OTC COVID-19 tests under the safe harbor.

New Guidance under Q1 of FAQs Part 52

Q1 of FAQs Part 52 makes the following key clarifications effective as of February 4, 2022:

  • Flexibility in Providing “Adequate Access”: In order to meet the requirements of the safe harbor, plans must ensure participants have adequate access to OTC COVID-19 tests with no upfront out-of-pocket expenditure, i.e., direct coverage option. Whether a plan provides “adequate access” will depend on the facts and circumstances. “Adequate access” will generally require that OTC COVID-19 tests are available through at least one direct-to-consumer shipping mechanism and at least one in- person mechanism. In addition, participants must be adequately notified. Coverage may include providing coupons for participants to purchase tests at certain retailers and/or establishing alternative COVID-19 test distribution sites.

CHEIRON OBSERVATION: Plans should provide clear communications to participants to ensure that they are aware of how to access OTC COVID-19 tests without upfront cost and how to get reimbursed for tests they purchase.

  • Limiting OTC COVID-19 Tests by Manufacturer Allowed for Direct Coverage: A plan is not required to make all OTC COVID-19 tests available, rather it may make tests available from a limited number of manufacturers, such as those with whom the plan has a contractual relationship or from whom the plan can obtain OTC COVID-19 tests directly. However, the plan must still reimburse (up to $12 per test, if the direct coverage safe harbor applies) for all FDA approved tests.
  • Flexibility in Direct-To-Consumer Shipping Mechanism: A direct-to-consumer shipping mechanism is any program that provides direct coverage of OTC COVID-19 tests for participants without requiring them to obtain the test at an in-person location. It includes online or telephone ordering and may be provided through a pharmacy or other retailer, the plan or issuer directly, or any other entity on behalf of the plan or issuer. A direct-to-consumer shipping program may, but does not have to, provide exclusive access through one entity, as long as it allows a participant to place an order for OTC COVID-19 tests to be shipped to them directly without charge for the test. A plan may charge shipping costs related to the tests in a manner consistent with other items or products provided by the plan via mail order.

CHEIRON OBSERVATION: Using the PBM’s mail order pharmacy may be the easiest mechanism for many plan sponsors to offer the direct-to-consumer shipping option.

Additional Guidance under FAQs Part 52

  • Temporary Shortage: The Departments will not take enforcement action against a plan that is temporarily unable to provide adequate access to OTC COVID-19 tests through its direct coverage program due to a supply shortage, even if that supply shortage means the individual is unable to obtain at least 8 OTC COVID-19 tests that month. In that circumstance, a plan that otherwise meets the requirements of the safe harbor may continue to limit reimbursement to $12 per test for OTC COVID-19 tests purchased outside of the direct coverage
  • Discouraging Fraud or Abuse: To discourage fraud or abuse, a plan may limit coverage to tests purchased from established retailers that would typically be expected to sell OTC COVID-19 tests. Plans may disallow reimbursement for tests that are purchased from a private individual or from a seller that uses an online auction or resale marketplace and may implement a policy requiring reasonable documentation of proof of purchase that clearly identifies the product and seller.
  • Coverage of Lab-read Tests Not Required (unless prescribed): These requirements for OTC COVID-19 tests apply only to self-administered and self-read tests that can be obtained without a prescription and completely used and processed without the involvement of a laboratory or other health care provider. They are not applicable to a test that requires the involvement of a health care provider (such as a test where a consumer collects a specimen at home and sends the specimen to be processed in a laboratory). However, under FFCRA a plan must cover such tests when ordered by an attending health care provider.
  • Preventing Double Reimbursement from HRAs and FSAs: Plans may wish to advise individuals not to seek reimbursement from a health FSA or HRA for the cost (or the portion of the cost) of OTC COVID-19 tests paid or reimbursed by the plan and not to use a health FSA or HRA debit card to purchase OTC COVID-19 tests for which the individual intends to seek reimbursement from the plan. As individuals cannot be reimbursed more than once for the same medical expense. For OTC COVID-19 tests costing over $12, plans should allow reimbursement in HRAs and FSAs for a member’s excess cost the same as the plan allows for balance billing reimbursement on other out-of-network medical claims.

Cheiron consultants can assist you with your compliance with the coverage requirements for COVID-19 tests.

Cheiron is an actuarial consulting firm that provides actuarial and consulting advice. However, we are neither attorneys nor accountants. Accordingly, we do not provide legal services or tax advice.