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Mar 2020
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March 27, 2020

CARES Act Provisions for Health & Welfare Plans: Implications for Employers

Congress has passed some significant legislation in response to the COVID-19 emergency. The Families First Coronavirus Response Act (FFCRA) was enacted on March 18, 2020, and today, the President signed the enactment of the Coronavirus Aid, Relief and Economic Security (CARES) Act. While most of the CARES Act is concerned with funding programs and getting money out to people to spend, employers should take note of the following provisions that affect health and welfare benefit plans: 
 
  • Expansion of COVID-19 Tests to be Covered Without Cost-Sharing.
    Under FFCRA, health plans must cover, with no cost-sharing, FDA-approved COVID-19 diagnostic tests. The CARES Act expands the types of tests that must be covered, with no cost sharing, to include tests where the developer has requested, or intends to request, emergency-use authorization from the FDA; tests developed in and authorized by a State; and other tests that the Secretary of the Treasury in guidance determines are appropriate.

    Implications for Employers: To the extent that these changes will only apply during the emergency period, the federal agencies are not requiring employers to formally amend their plan documents; but employers must still communicate the temporary change to employees on a timely basis so they can take advantage of the expanded coverage.
  • Clarification on COVID-19 Testing Costs to be Covered by Health Plan.
    Although FFCRA requires health plans to cover COVID-19 testing without cost-sharing, it does not address the issue of test pricing. The CARES Act clarifies the prices that a health plan must pay for COVID-19 testing. Where the health plan has negotiated a rate prior to the declaration of the public health emergency, that negotiated rate will apply for the duration of the emergency. But where no price has been negotiated in advance, the health plan must pay either the cash price published by the health care provider on its public internet website or some lesser rate negotiated between the health plan and the provider.

    Implications for Employers: Payment terms for COVID-19 testing will likely be handled by the employer’s insurer or TPA. But since normal plan limitations on payments (such as allowed amounts or usual and customary costs) won’t apply, employers may want to consider explaining this in their communication to employees describing the coverage for COVID-19 testing. 
  • Temporary Tax-Free Benefit for Employer Payment of Student Loans.
    The CARES Act allows employers to make student loan payments of up to $5,250 on behalf of an employee tax-free under a Tax Code Section 127 Educational Assistance Program through the end of 2020.

    Implications for Employers: This is voluntary, but employers that adopt this benefit must put in place a written program that describes key features of the program and communicate the availability of the program to eligible employees. If the employer also offers other tax-free educational assistance benefits, the total amount (including any tax-free student loan payments) provided to any one employee cannot exceed $5,250. Unfortunately, this benefit sunsets after 2020, but since a lot of employers have been asking for this kind of benefit, there is always the possibility that Congress may extend it beyond this year. 
  • Rapid Coverage of COVID-19 Preventive Services and Vaccinations as Preventive Services with No-Cost Sharing.
    The Public Health Services Act (PHSA), as modified by the Affordable Care Act, requires that certain recommended preventive care services be covered without cost-sharing, but generally gives health plans at least a year after the recommendation to add this benefit. The CARES Act shortens this period for COVID-19 preventive services and vaccinations to 15 days from the date of the recommendation.

    Implications for Employers: Employers will have to stay alert for announcements about COVID-19 preventive services and vaccinations. While insurers and TPAs will probably move to add these benefits to health plans, employers will want to monitor to ensure it happens on a timely basis and must communicate the coverage to employees on a timely basis.
  • Temporary Exemption for Telehealth Services for HDHPs.
    A high deductible health plan (HDHP) designed to work with Health Savings Accounts (HSAs) normally cannot cover the costs of treatment until the participant reaches the HDHP’s annual out-of-pocket deductible (with certain exceptions, such as for preventive care, dental and vision expenses). The CARES Act allows an HDHP during plan years that begin on or before December 31, 2021 to also cover telehealth services with no cost-sharing.

    Implications for Employers: This is not mandated by law, but if an employer’s insurer or TPA implements this, the employer must communicate the coverage change to participants on a timely basis. If this change in coverage will extend beyond the current emergency, the employer will also want to make sure this benefit ends for its HDHP/HSA option at the end of the 2021 plan year (unless Congress extends the exemption before then). 
  • Tax-Free Coverage for Over-the-Counter Drugs and Menstrual Care Products through HSAs, Archer MSAs and Health Care FSAs.
    The CARES Act deletes provisions that exclude the use of funds from HSAs, Archer MSAs and health care FSAs to purchase over-the-counter drugs without a prescription. The CARES Act also allows tax-free funds from these accounts to pay for menstrual care products. These changes can apply to expenses that the employee has incurred since January 1, 2020.

    Implications for Employers: For an employer’s health care FSA, this is voluntary, but it should be a popular change for employees who participate in that program. If implemented, an employer should first verify that its TPA can administer this benefit; and the employer will need to amend its health care FSA plan and communicate the change to employees on a timely basis. HSAs and Archer MSAs are not employer plans, but employers should review any employee communications regarding those programs to see if they need to be updated.

Warner is here to help! If you need assistance with implementing CARES Act provisions, please contact a member of Warner’s Employee Benefits and Executive Compensation Practice Group.

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