Benefits Monthly Minute

Coverage of At-Home COVID-19 Tests | New Guidance on Group Health Plan Provider Compensation Disclosure Rules | Revised Auditing Standards for ERISA Plans

The January Monthly Minute highlights the new OTC COVID-19 test coverage mandate (eff. January 15, 2022), group health plan provider compensation disclosure rules, and updated standards for ERISA plan financial statement audits.

LEGAL ALERT: Coverage of At-Home COVID-19 Tests

This week, the Biden Administration announced that group health plans are required to cover the cost of at-home/over-the-counter (OTC) COVID-19 tests beginning January 15, 2022. Newly released FAQs, summarized below, provide that individuals who purchase OTC COVID-19 diagnostic tests during the public health emergency will be able to seek reimbursement from their plan.

  • Plans are generally required to cover OTC COVID-19 tests available without an order or individualized clinical assessment by a health care provider. Coverage must be provided without imposing any cost-sharing requirements, prior authorization, or other medical management requirements. (However, this does not modify previous guidance addressing coverage for purposes not primarily intended for individualized diagnosis or treatment of COVID-19, including the guidance that states that plans and issuers are not required to provide coverage of testing for employment purposes). A plan or issuer may require a participant, beneficiary, or enrollee who purchases an OTC COVID-19 test to submit a claim for reimbursement to the plan.
  • If a plan provides direct coverage of OTC COVID-19 tests, generally, it may not limit coverage to only tests that are provided through preferred pharmacies or other retailers; however, a plan may limit reimbursement if the plan meets the conditions of a newly announced safe harbor. Specifically, the Departments will not take enforcement action against any plan that provides coverage of OTC COVID-19 tests purchased by participants, beneficiaries, and enrollees during the public health emergency by arranging for direct coverage of OTC COVID-19 tests through both its pharmacy network and a direct-to-consumer shipping program, and otherwise limits reimbursement from nonpreferred pharmacies or other retailers to no less than the actual price, or $12 per test (whichever is lower). Plans also may not impose any prior authorization or other medical management requirements on participants, beneficiaries, or enrollees that obtain applicable OTC COVID-19 tests via a direct coverage program and must take steps to ensure that individuals have adequate access to OTC COVID-19 tests.
    • Direct coverage means that an individual is not required to seek reimbursement post-purchase; instead, the plan processes payment to the preferred pharmacy or retailer directly.
  • A plan may generally set limits on the number or frequency of OTC COVID-19 tests covered under this rulemaking, provided that the plan limits the number of covered OTC COVID-19 tests for each participant, beneficiary, or enrollee to no less than 8 tests per month. (This safe harbor applies only with respect to the coverage of OTC COVID-19 tests that are administered without a provider’s involvement or prescription; plans must continue to provide coverage for COVID-19 tests that are administered with a provider’s involvement or prescription.)

KMK Comment: Plan administrators should become familiar with the FAQs as they provide additional details about the new coverage requirements, and specifically pertaining to facilitating access to OTC COVID-19 tests and preparing related participant communications. As well, the FAQs provide non-COVID-19 related guidance which touches on coverage of preventive care services, colonoscopy coverage, and contraceptive services coverage. It is important to work with legal counsel and the plan’s TPA as you implement these new coverage requirements.

New Year Means New Guidance on Group Health Plan Provider Compensation Disclosure Rules

Among the many impacts of the Consolidated Appropriations Act, 2021 on employee benefit plans is the requirement for individuals to disclose direct and indirect compensation of $1,000 or more that is reasonably expected to be received in connection with the provision of brokerage or consulting services to group health plans. The information generally must be disclosed reasonably in advance of the parties entering into such contract or arrangement and the disclosures are intended to provide the plan fiduciary with sufficient information to assess the reasonableness of compensation and potential conflicts of interest where a covered service provider receives indirect compensation from outside sources. The CAA provided that the new disclosure requirements apply beginning one year after the date of the CAA’s December 27, 2020 enactment, i.e., December 27, 2021. While the DOL has opted not to issue regulatory guidance at this time, DOL Field Assistance Bulletin 2021-03, released December 30, 2021, announces the DOL’s temporary enforcement policy for group health plan service provider disclosures under ERISA section 408(b)(2)(B). In short, in the case of a covered service provider under ERISA section 408(b)(2)(B) by reason of providing brokerage services or consulting to a group health plan, the DOL will not treat that person as having failed to make required disclosures to a responsible plan fiduciary as long as the disclosures are made in accordance with a good faith, reasonable interpretation of ERISA section 408(b)(2)(B). Notably, FAB 2021-03 clarifies the following points:

  • The DOL will view it as a good faith and reasonable step for a group health plan service provider to take into account prior ERISA 408(b)(2) pension plan guidance.
  • ERISA section 408(b)(2)(B) covers insured and self- insured group health plans, including grandfathered health plans and limited-scope dental and vision plans. ERISA section 408(b)(2)(B) also applies to group health plans regardless of size -- there is no exception for small plans covering fewer than 100 participants. However, QSEHRAs are not subject to these provisions.
  • ERISA section 408(b)(2)(B) defines “covered service providers” to include providers of brokerage services and consulting to group health plans. The definition is not limited to service providers who are licensed as, or who market themselves as, “brokers” or “consultants.”
  • Disclosure of compensation in ranges may be reasonable in circumstances when the occurrence of future events or other features of the service arrangement could result in the service provider’s compensation varying within a projected range. In all cases, the adequacy of the disclosure should be measured against a principal objective of the rule – to provide the responsible plan fiduciary with sufficient information about the compensation to be received by covered service providers to allow the fiduciary to evaluate the reasonableness of the compensation, and the severity of any associated conflicts of interest.
  • The new requirements apply beginning on December 27, 2021. Only contracts or arrangements for services that fall within the scope of ERISA section 408(b)(2)(B) which are entered into, extended, or renewed on or after December 27, 2021 are required to comply with these disclosure requirements.

KMK Comment: Considering that the DOL does not intend to issue regulations on these group health plan disclosure requirements, it is imperative for plan sponsors and covered service providers to focus their compliance efforts on consistency with FAB 2021-03 and the long-standing DOL regulations governing service provider disclosures for pension plans.

Revised Auditing Standards for ERISA Plans

Now that 2021 has come to a close, plan sponsors should consider the AICPA’s Statement on Auditing Standards No. 136, “Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA,”  which includes updated performance standards and reporting requirements. These new requirements are effective for audits of ERISA plan financial statements for periods ending on or after December 15, 2021 (although early adoption was permitted). Notably, the new standards dispense with the term “limited scope audit” and impose new representation requirements on plan sponsors and fiduciary committees, as described below.

Under earlier guidance, ERISA allowed a limited-scope audit of plans with assets held by a bank or similar financial institution or an insurance company regulated and supervised and subject to periodic examination by a state or federal agency. Any information on plan assets and related transactions prepared by and certified as both complete and accurate by the financial institution was not subject to audit as part of a limited-scope audit. While these audit standards continue to be allowed under the new guidance, the new rules refer to “ERISA Section 103(a)(3)(C)” audits -- the ERISA provision that establishes the limited scope exception. Although the distinction is subtle, regulators maintain that it is more accurate given the ERISA provision is not a true scope limitation, rather it allows for disclaimers of opinion where said information is certified elsewhere (by a qualified institution).

Further, the revised audit standards state that the auditor should obtain the agreement of management that it acknowledges its responsibility for maintaining a current plan and amendments; administering the plan and determining that the plan’s transactions that are presented and disclosed in the financial statements are in conformity with the plan’s provisions, including maintaining sufficient participant records to determine benefits due; and, when management elects to have an ERISA Section 103(a)(3)(C) audit, determining whether an ERISA Section 103(a)(3)(C) audit is permissible, the investment information is prepared and certified by a qualified institution, the certification meets the requirements in 29 CFR 2520.103-5, and the certified investment information is appropriately measured, presented, and disclosed.

KMK Comment: Given the new guidance imposes more responsibilities on employers, resulting in a shift of liability from plan auditors to management, it’s important to designate an individual or committee to understand and monitor these new compliance requirements, and work closely with accountants and counsel when preparing ERISA plan financial statements and audits.  

The KMK Law Employee Benefits & Executive Compensation Group is available to assist with these and other issues.

Lisa Wintersheimer Michel

John F. Meisenhelder

Antoinette L. Schindel

Kelly E. MacDonald

Rachel M. Pappenfus

KMK Employee Benefits and Executive Compensation email updates are intended to bring attention to benefits and executive compensation issues and developments in the law and are not intended as legal advice for any particular client or any particular situation. Please consult with counsel of your choice regarding any specific questions you may have.

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