The CARES Act and Health Plan Impacts

On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act), which was subsequently signed by the President.  The provisions of the CARES Act impact many areas, including economic assistance for individuals and businesses, support for the healthcare system in the fight against the coronavirus, and provisions impacting retirement plans and healthcare benefit plans.  The CARES Act also expands and further clarifies certain coverage mandate and paid leave provisions previously put in place by the Families First Coronavirus Response Act (FFCRA).

On Friday, June 19, the IRS released Notice 2020-50 which provided guidance on these optional changes.

Included below are the impacts on healthcare benefit plans as a result of the provisions of the CARES Act.

Expansion of COVID-19 Testing Mandate and Future Services

Coverage of COVID-19 Testing

The CARES Act expands on the coverage requirements of the FFCRA. The FFCRA required that all health plans provide coverage of FDA-approved COVID-19 testing and related services at no cost to participants and with no requirements for prior authorization or constraints imposed by medical management.

The CARES Act broadened the scope of the COVID-19 testing required under the mandate to include FDA-approved testing (same as FFCRA), testing for which the manufacturer intends to seek (or is using) Emergency Use Authorization, testing developed or authorized by a State, or testing that is deemed appropriate by HHS.

Reimbursement for COVID-19 Testing

Given the range of testing required to be covered by health plans, the CARES Act also included requirements regarding the reimbursement for COVID-19 testing.  The CARES Act requires health plans to reimburse providers for COVID-19 testing at the same rate as negotiated before the HHS emergency declaration.  Absent a previously negotiated rate, health plans must reimburse providers at the cash price for testing.

To achieve transparency, providers are required to post the cash price for COVID-19 testing on their public website.

Future Services

The CARES Act also requires that health plans cover (without member cost-sharing) “qualifying coronavirus preventive services” in an expedited fashion.  The definition of “qualifying” includes items, services or immunizations that are intended to prevent or mitigate COVID-19 and that receive an “A” or “B” rating from the United States Preventive Services Task Force (USPSTF) or an immunization recommended by the CDC’s Advisory Committee on Immunization Practices.

Effectively, the CARES Act is mandating that future COVID-19 preventive and mitigating treatments that meet the qualification standards referenced above be covered by health plans at no cost to the member within 15 business days after the date the service meets the “qualifying” definition.

Over-the-Counter Drug Changes for Tax-Advantaged Accounts

Section 9003 of the Affordable Care Act (ACA) established a regulation that stated that distributions from health FSAs, HRAs, and HSAs could not reimburse the purchase of over-the-counter medicines or drugs without prescription, effective 1/1/2011.

The CARES Act removes the ACA restriction on over-the-counter items.  Individuals are now able to use tax-advantaged accounts (like Health FSAs, HRAs, and HSAs) for over-the-counter drugs and medicines not prescribed by a physician as well as certain menstrual care products.

It is expected that the IRS will update prior guidance or disseminate additional information on the tax treatment of these products in the future.


The CARES Act also established clarity with regard to Health Savings Accounts (HSAs) and telehealth services. In response to COVID-19, many health plans and health insurers began waiving the cost of telehealth services to encourage members to use telehealth services in lieu of visiting a provider’s physical location for care. This raised concern with sponsors of qualified high-deductible health plans (QHDHPs), who were concerned as to whether this would impact the eligibility of plan members to contribute to their Health Savings Accounts.

The CARES Act established a temporary safe harbor, permitting QHDHPs to offer telehealth services with no application of the deductible for plan years beginning on or before December 31, 2021.

Next Steps for Employers

  • Ensure that COVID-19 testing and coverage requirements are in place. Typically these items will be handled by the third-party administrator (TPA), who will have standard programs to meet the requirements of the federal law.  Employers should carefully consider any deviation from the standard programs put forth by their TPA.
  • Communicate OTC changes for tax-advantaged accounts, and update plan documents if needed.
  • For sponsors of QHDHPs, evaluate whether or not you wish to provide telehealth benefits with no application of the deductible.

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Our health and welfare compliance updates are designed to provide useful information to organizations about the operation and management of their employee benefit plans. Although we go to great lengths to ensure that only accurate and timely information is provided, we recommend that you consult with an attorney for professional assurance that our information, and your interpretation of it, is appropriate for your particular situation. Nothing provided herein should be construed as legal or tax advice.