COVID-19 and Employee Benefits: The Impact on Group Health Plans

March 24, 2020

Note: this is the first in a series of McGuireWoods client alerts relating to COVID-19 and employee benefits. For additional details, please see our other alerts:

  • COVID-19 and Employee Benefit Plans, Part 2: CARES Act (April 1, 2020)
  • COVID-19 and Employee Benefits #3: Considerations for Compensation Committees (May 4, 2020)
  • COVID-19 and Employee Benefits #4: IRS Releases New CARES Act Guidance (June 25, 2020)
  • COVID-19 and Employee Benefits #5: IRS Allows Midyear Safe Harbor Retirement Contribution Changes (July 15, 2020)

On March 18, 2020, the Families First Coronavirus Response Act was signed into law. Among the new law’s many provisions is the requirement, effective as of the date of enactment, for group health plans to provide free novel coronavirus (COVID-19) testing and related services without copays, coinsurance or deductibles. This includes both in-person visits and telehealth visits but does not extend coverage to follow-up medical care that may be required based on COVID-19 test results. This article summarizes the impact of this law and recent Internal Revenue Service Notice 2020-15 on group health plans.

The new law eliminated patient cost-sharing for COVID-19 diagnostic testing and related services provided during the emergency period. (Note: Pursuant to 42 U.S.C. 1320b–5(g), an “emergency period” is the period during which there exists: (A) an emergency or disaster declared by the president pursuant to the National Emergencies Act or the Robert T. Stafford Disaster Relief and Emergency Assistance Act; and (B) a public health emergency declared by the secretary pursuant to section 319 of the Public Health Service Act.)

Under the Families First Coronavirus Response Act, self-funded and fully insured group health plans, including grandfathered plans under the Affordable Care Act, regardless of the size of the employer, are required to provide COVID-19 diagnostic testing and related services at no cost to the individual. This means COVID-19 diagnostic testing and related services are not subject to deductibles, copays or coinsurance. Thus, the new law mandates free coverage, without pre-authorization or other medical management requirements for testing, of those products and services furnished during a healthcare provider office, urgent care center, telehealth or emergency room visit that result in ordered or performed diagnostic testing for COVID-19, or evaluation to determine the necessity of diagnostic testing for COVID-19. However, other medical care received during the visit, a subsequent hospital stay and follow-up care for COVID-19 are not covered free of charge.

Internal Revenue Service Notice 2020-15

On March 11, 2020, the IRS issued Notice 2020-15 permitting high-deductible health plans (HDHPs) to provide cost-free COVID-19 testing and treatment, prior to a participant first satisfying the deductible, without violating the rules governing health savings accounts (HSA). Under the guidance, payment for COVID-19 testing and treatment under the HDHP can be considered “preventive care.”

Generally, under existing law, prior to satisfying the deductible, only preventive care can be offered free to participants in an HDHP. Otherwise, the HDHP would violate Internal Revenue Code Section 223(c)(2)(A) and disqualify tax-favored treatment of HSA contributions under Internal Revenue Code Section 223(c)(1). An HSA is a tax-favored savings account available only to participants in an HDHP. Therefore, with the relief provided by Notice 2020-15, COVID-19 testing and treatment will not jeopardize the favorable tax treatment of HSA contributions, as those benefits will be considered “preventive care” for purposes of the underlying HDHP. Note that, because Notice 2020-15 was issued prior to the passage of the new law, the notice does not discuss the requirements for employer group health plans to provide the COVID-19-related benefits discussed above.

Next Steps

Now that the Families First Coronavirus Response Act has been signed into law, employers must take appropriate steps to comply with the coverage requirements. Generally, a plan amendment and a summary of material modification are required for voluntary and legally mandated coverage changes. Employers will need to review their group health plans and notify participants to explain these changes.

Additional Guidance and Other Group Health Plan Issues

The new law invites the secretaries of the Departments of Health and Human Services, Labor, and Treasury to implement its provisions. Also, a third bill — the Coronavirus Aid, Relief, and Economic Security Act — is underway in the Senate, while the House considers the proposed Take Responsibility for Workers and Families Act. McGuireWoods will continue to monitor the progress of these bills and other COVID-19-related legislation and guidance and provide updates along the way.

For additional guidance on how this new legislation may impact your business, or information on other issues related to group health plan coverage challenges during the COVID-19 crisis, contact the authors of this article or any other member of the McGuireWoods employee benefits team.

McGuireWoods has published additional thought leadership related to how companies across various industries can address crucial COVID-19-related business and legal issues.