New Year Brings New Group Health Plan Guidance

Legal Alert

With a new year comes new requirements for group health plans (GHPs) and insurers, and this legal update summarizes two new developments with immediate compliance implications. First, the tri-agencies (DOL, CMS, and Treasury) issued new FAQs on required GHP coverage of over-the-counter (OTC) COVID-19 tests and other preventive services, and the Centers for Medicare & Medicaid Services released related guidance on how individuals may obtain free tests. Second, the DOL issued guidance on the new disclosure rule for brokers and consultants who provide services to ERISA GHPs.

Required Coverage for Diagnostic OTC COVID-19 Tests

Effective for eligible OTC COVID-19 tests (Tests) purchased on or after January 15, 2022, GHPs and insurers must generally cover diagnostic Tests as preventive care without any cost-sharing (such as copays, deductibles, or coinsurance), and without requiring a prescription or assessment from a health care provider. Coverage is not required for employer-mandated or surveillance Tests. GHPs can only impose limits on the number of covered Tests per month and set maximum out-of-network reimbursement rates if the conditions of the safe harbor are met.

The Safe Harbor Rule

Under the safe harbor, a GHP may limit the number of covered Tests to eight per month per enrolled individual and set a maximum reimbursement rate for Tests acquired out-of-network at the lesser of $12 or the actual price. The safe harbor is intended facilitate consumer access and provide for a seamless experience in obtaining free Tests.

To meet the safe harbor, a GHP must provide direct coverage of Tests where a covered individual is not required to seek reimbursement post-purchase; instead, the GHP must arrange for the Tests to be provided directly by preferred pharmacies or retailers (including direct shipping programs) with no up-front expenditures, prior authorizations, or other medical management requirements.

If a GHP does not meet the safe harbor, it cannot limit the number of covered Tests per month or set a maximum reimbursement rate. The safe harbor rule does not apply to COVID-19 tests ordered or prescribed by a medical provider, even if OTC.

Preventing Fraud and Abuse

A GHP may require participants to provide reasonable documentation of proof of purchase of the Test when submitting a claim for reimbursement (such as a copy of the UPC code and/or a receipt showing the price and date of purchase), along with an attestation that the purchase was for the individual’s personal use.

Required Coverage for Follow-Up Colonoscopies

For plan or policy years starting on or after May 31, 2022 (the 2023 Plan Year for calendar year plans/policies), GHPs must cover follow-up colonoscopies that are conducted after a positive non-invasive stool-based screening test or abnormal results of direct visualization screening as preventative care without any cost-sharing.

Guidance on Required Contraceptive Services

Due to numerous complaints that GHP participants are being denied legally required contraceptive coverage, the FAQs reiterate the requirement that a non-exempt GHP must provide coverage for all Federal Drug Administration (FDA) approved contraceptive products for women, even if not listed in the current FDA Birth Control Guide (some newer products are not in this guide), as long as the individual and the individual’s attending provider determine that a particular service or FDA-approved, cleared, or granted contraceptive product is medically appropriate. The FAQs cite examples of medical management and other activities that violate this requirement, including denying coverage for all or particular brand-name contraceptives, requiring fail-first of other services or contraceptives, or failing to provide an easily accessible, transparent, and expeditious exception process that is not unduly burdensome.

Plan administrators may want to check with their third-party administrator, pharmacy benefits manager, and/or insurance company to verify compliance with female contraception coverage requirements.

New GHP Disclosure Rule and DOL FAB 2021-3

As you may be aware, the Consolidated Appropriations Act of 2021 (CAA) extended the applicability of the disclosure requirements under ERISA § 408(b)(2)(B) to entities or persons who provide brokerage or consulting services to ERISA-covered GHPs and who expect to receive $1,000 or more in direct or indirect compensation in connection with providing these services. These are the same service provider fee disclosure rules that have applied to retirement plans since 2012. This extension of the disclosure rules to GHP service providers may apply to, among others, insurance brokers, benefit consultants, pharmacy benefit managers, and third-party administrators. Fiduciaries of a GHP must require, and then review for reasonableness, the direct and indirect compensation that these service providers receive relating to the services provided to the plan.

The prohibited transaction rules of ERISA § 406(a)(1) focus on the parties to a transaction and generally prohibit transactions between a plan and a party in interest. ERISA § 408(b)(2) provides an exemption for reasonable arrangements with a party in interest for services necessary for the operation of a plan if no more than reasonable compensation is paid. For GHPs, ERISA § 408(b)(2), as amended by the CAA, now requires specific disclosures for a contract or arrangement for certain services to be considered reasonable. To be “reasonable,” a covered service provider discloses information about the services it provides and the compensation it “expects” to receive in connection with a contract or arrangement with a covered GHP to the covered plan fiduciaries in advance of entering into a contract or arrangement. Compensation includes not only the fees that the plan or plan sponsor pays for the services, but also “indirect” compensation that the service provider receives from other sources, such as commissions from insurance companies or referral fees.

Recently, the DOL issued the Field Assistance Bulletin 2021-3 with its temporary enforcement policy for the GHP service provider disclosures. Plan fiduciaries should note a few key items:

  1. The disclosure rules apply to contracts executed or renewed (including amendments or modifications) on or after December 27, 2021.
  2. The disclosure rules apply to GHPs as defined in ERISA § 733(a), which includes both insured and self-insured GHPs, large and small GHPs, and plans that provide only “excepted benefits” such as limited scope dental and vision plan and retiree-only plans.
  3. Covered service providers under the new expansion of the disclosure rules include providers of “brokerage services” and “consulting” services, based on services performed rather than the licensure or marketing materials.
  4. The DOL indicated good-faith reasonable interpretations are permitted until future guidance is issued, and covered plans and service providers may reasonably rely on the existing retirement plan disclosure regulations and guidance for purposes of the required disclosures to GHPs.

Under these new expanded disclosure rules, when executing or renewing future GHP service agreements, plan fiduciaries must receive, review, and retain covered service provider disclosures of indirect and direct compensation. This is something we expect the DOL will request in future audits, so it is important to document compliance.

For More Information

If you are interested in more information about any of the topics discussed herein, please contact Bethany Bacci at, Howard Bye-Torre at, or other members of the Employee Benefit Group at Stoel Rives.

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