UPDATE: COVID-19 Employee Benefits FAQs for Employers Focus on Health and Welfare Benefit Plans
In just over a week following enactment of the Families First Coronavirus Response Act (FFCRA), the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was signed into law on March 27, adding to the list of adjustments that employers may need (or want) to make to their health and welfare plans. Troutman Sanders Employee Benefits & Executive Compensation attorneys have joined forces with our future colleagues at Pepper Hamilton to put together this FAQ to highlight these new considerations raised by the CARES Act. Employer action items are noted in bold.
If you have any questions, require plan amendments or assistance with employee communications, please contact any member of the Troutman Sanders or Pepper Hamilton Employee Benefits and Executive Compensation Practice Groups or the COVID-19 Response Team. We are here to help you in any way that we can.
This FAQ is current as of March 30, 2020. We will make every effort to update it as pertinent information becomes available.
Does the CARES Act change the coverage mandated by the FFCRA for COVID-19 testing?
Yes, the CARES Act ---
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expands the COVID-19 testing coverage that all employer-sponsored group health plans must provide without cost sharing – to include additional categories of diagnostic testing, such as testing authorized by a state or for which emergency use authorization has been or intends to be requested;
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clarifies that the amount a group health plan must pay for mandated COVID-19 testing is the rate negotiated with the testing provider before the COVID-19 public health emergency began (on January 31, 2020) or, if there wasn’t a negotiated rate in place at that time (i.e., the provider is out of network), the cash price listed on the provider website* (or a lower negotiated price); and
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accelerates the time by which group health plans will need to cover 100% of the cost of an eventual COVID-19 vaccine.**
* Note that the CARES Act imposes penalties on providers who, during the COVID-19 public health emergency, fail to list the cash price for COVID-19 testing on a public website.
** Although health plans typically have a year to cover newly recommended preventive services, COVID-19 vaccines will need to be covered within 15 business days of such recommendation.
Employers should work with their third-party administrators or insurers to ensure timely adherence to the COVID-19 coverage mandates, make any necessary amendments to plan documents to reflect this coverage and communicate any material modifications to employees as soon as possible.
We offer a high deductible health plan (HDHP), will it violate the HDHP rules if the plan covers telehealth before the applicable deductible is met?
As of March 18, 2020, the FFCRA requires employers sponsoring HDHPs to cover telehealth services related to COVID-19 testing without a deductible (or any other cost sharing). Additionally, existing IRS guidance permits (but does not require) HDHPs to cover any telehealth services related to COVID-19 testing or treatment with low or no participant cost sharing prior to the HDHP deductible being satisfied. The CARES Act now provides additional flexibility for HDHPs to cover all telehealth and other remote healthcare services before the HDHP deductible is satisfied, regardless of whether the visit relates to COVID-19. This provision seems to be aimed at both expanding telehealth access for patients who may have COVID-19 and protecting other patients from potential exposure. In addition, the hope may be that covering telehealth services before the HDHP deductible is met will encourage patients with ailments unrelated to COVID-19 (such as diabetes) to seek out virtual care, thus freeing up doctors and other front-line providers to care for more critically-ill patients in-person. Currently, this telehealth provision is available only for plan years beginning on or prior to December 31, 2021.
Employers that sponsor HDHPs with a telehealth feature will need to determine whether to expand the scope of pre-deductible telehealth services to include additional services beyond the required COVID-19 testing. If any changes are made, HDHP documents will likely need to be amended and communicated to employees.
Does the CARES Act impact health savings accounts (HSAs), health flexible savings accounts (FSAs) and health reimbursement accounts (HRAs)?
Yes, the CARES Act eliminates the existing requirement for a physician prescription in order for HSAs, FSAs and HRAs to reimburse expenses for over-the-counter medical products. Additionally, the CARES Act permits HSAs, FSAs and HRAs to reimburse expenses for menstrual care products. These changes are effective for expenses incurred after December 31, 2019.
Employers should work with third-party administrators and legal counsel to update HSA, FSA and HRA plan documents to include these changes, including discussion of the timing and administration of these changes given the apparent potential for a retroactive effective date to January 1, 2020. These changes should also be communicated to employees.
We offer an Educational Assistance Program. Does the CARES Act provide us additional avenues to assist our employees in paying educational expenses?
Yes, the CARES Act contains a temporary provision that provides tax-free status to employer-paid student loan repayments through December 31, 2020. This expands the Internal Revenue Code’s current definition of expenses that can be provided by the employer as “educational assistance.” Under the CARES Act, employers that offer educational assistance programs (or that wish to establish such programs) may provide up to $5,250 per year, per employee in tax-free assistance for employees repaying student loans. Such payments would be excluded from both the employee’s income taxes and the employer’s payroll taxes. Some economists see this assistance as a way to alleviate the drag on the economy as our country recovers from COVID-19. In addition, the assistance may help employers recruit and retain talented employees.
An employer that wishes to provide these pre-tax student loan repayments will need to amend its Educational Assistance Program (or adopt a program) to include this benefit and notify employees.