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The CARES Act: Health and benefit implications for plan sponsors

Benefits Administration and Outsourcing|Health and Benefits|Talent|Total Rewards
COVID 19 Coronavirus

By Ann Marie Breheny , Anu Gogna and Ben Lupin | April 8, 2020

The CARES Act brings changes to employee benefits and employer-sponsored group health plans in response to the COVID-19 pandemic.

On March 27, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security (CARES) Act, which provides changes for employer-sponsored group health plans and other benefit programs in response to the COVID-19 pandemic. Provisions include an expanded temporary safe harbor allowing high-deductible health plans (HDHPs) to provide first-dollar coverage for telehealth services for all conditions, not just COVID-19; expanded coverage of COVID-19 testing and clarification on the cost to plans for testing at non-network providers; expedited coverage of COVID-19 preventive services and vaccines; changes to the items reimbursable by health savings accounts (HSAs), health reimbursement arrangements (HRAs) and health flexible spending accounts (FSAs); and changes to the previously passed COVID-19 testing mandate and emergency paid leave provisions.

Group health plan provisions

  • Telehealth and HDHPs. The CARES Act provides a safe harbor to allow HSA-qualifying HDHPs to provide telehealth or other remote health care services for all conditions (not just COVID-19) with no deductible or with a deductible that is lower than the applicable HDHP deductible.1 Such services can be offered without risking HSA eligibility. Providing telehealth without cost-sharing in non-HDHPs has never been an issue and may continue.

    The safe harbor remains in effect until the end of the 2021 plan year (i.e., for a calendar-year plan, it applies for the 2020 and 2021 plan years). This change will require plan document/summary plan description (SPD) amendments and carrier contract updates.

  • Coverage of COVID-19 vaccine and preventive services. Under the CARES Act, group health plans and health insurance issuers must cover, without cost-sharing, “qualifying coronavirus preventive services” — i.e., items, services and immunizations intended to prevent or mitigate COVID-19 that receive an “A” or “B” rating from the United States Preventive Services Task Force or a recommendation from the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention (CDC) with respect to the patient involved. This requirement will apply 15 business days after the recommendation is made (normally more than a one-year process).

    Plan amendments are unlikely to be necessary because plan documents and SPDs typically do not include a full list of preventive services. Further guidance on how individual-by-individual CDC recommendations will work in practice will likely be necessary.

  • Expansion of coverage for COVID-19 testing. Under the Families First Coronavirus Response Act (FFCRA),2 which took effect on March 18, all group health plans must cover Food and Drug Administration-approved testing to detect or diagnose COVID-19 and the administration of that testing without cost sharing or barriers. The coverage includes any services or items provided during a medical visit — including an in-person or telehealth visit to a doctor’s office, an urgent care center or an emergency room — that result in and are directly related to the coronavirus testing or screening. The CARES Act broadens the testing to include tests provided by labs on an emergency basis, state-developed tests and any other tests determined appropriate by the Department of Health and Human Services (HHS). For COVID-19-related testing at in-network providers, plans will pay the negotiated rate. For testing provided at non-network providers, plans will be required to pay the “cash price” listed on the provider’s website unless the plan negotiates another rate. The CARES Act does not address whether a participant could be subject to balance billing even after the plan has made payment to a non-network provider.

    Employers will need to communicate the availability of COVID-19 testing to their plan participants. Formal amendments to plan documents/SPDs will need to be made in accordance with ERISA rules (which generally allow the documents to be updated seven months after the end of the year in which the change is made). Note: The testing coverage requirements adopted under FFCRA and amended by the CARES Act apply only while there is a declared public health emergency.

  • Over-the-counter (OTC) medical products without prescription: The CARES Act allows account-based plans, including HSAs, FSAs and HRAs, to reimburse individuals for the purchase of OTC medical products, including menstrual products, without a prescription from a physician. This eliminates the Affordable Care Act requirement limiting the use of spending accounts to prescribed medicines or drugs (with the exception for insulin).

    Employers will want to work with their third-party administrators and vendors to make these changes to reimbursement systems as soon as possible.

COVID-19 emergency paid leave

The CARES Act provides some clarifications to the emergency paid leave programs enacted as part of the FFCRA, such as giving an employee who was laid off by an employer on March 1, 2020, or later access to paid family and medical leave in certain instances if he or she is rehired by the employer. The CARES Act also corrects a drafting error in the FFCRA to confirm that the $200/day and $10,000/aggregate paid leave maximums for employers subject to the emergency Family and Medical Leave Act (FMLA) provisions, and the $200/$511/day and $2,000/$5,110 aggregate limits for employers subject to the emergency paid sick leave requirements, apply per employee taking leave.

The emergency paid sick leave and emergency FMLA leave provisions continue to apply only to private-sector employers with fewer than 500 employees. The Department of Labor (DOL) has developed a webpage and FAQs on emergency paid leave (including how to determine whether an employer is a “covered employer”).

Student loan repayment assistance

The CARES Act amends the tax code pertaining to Educational Assistance Programs. Between March 27, 2020 (the CARES Act’s enactment date) and December 31, 2020, employer payments of principal or interest on any employee qualified education loan will not be included in the employee’s gross income. The total amount that can be provided under an Educational Assistance Program, including student loan repayments for the temporary period, remains capped at $5,250 per calendar year per employee.

Any employer wanting to take advantage of these provisions must have a written educational reimbursement program in place amended to include student loan repayment during the temporary period.

Further guidance required

Certain provisions have no immediate implications for employers but will require additional government guidance:

  • HIPAA and PHI. The CARES Act requires HHS to issue guidance on sharing patients’ Health Insurance Portability and Accountability Act (HIPAA)-covered protected health information (PHI) during the COVID-19 public health and national emergencies. The guidance is to be issued within 180 days of the act’s enactment (i.e., March 27) and will include information on how to comply with HIPAA regulations and any policies that become effective during these emergencies.

  • Confidentiality and disclosure of records relating to substance use disorder. Under the CARES Act, once a patient at a federally subsidized substance use disorder treatment center gives written consent, HIPAA-covered entities and business associates may use and disclose information relating to that patient in accordance with HIPAA rules. This provision may relieve HIPAA-covered entities, including health plans and many health care providers, from the need to meet additional notice and confidentiality requirements that took effect earlier this year.3

  • Expansion of DOL authority to postpone certain deadlines. The CARES Act amends ERISA by adding “public health emergency” to the circumstances under which the DOL may postpone an ERISA filing deadline for up to one year. The law does not address specific filings, such as the Form 5500, which will likely be part of forthcoming DOL guidance. The CARES Act does not give authority to the IRS, Treasury or HHS to postpone their deadlines, but the employer community has requested deadline relief from those agencies.


1 This extends the rule established in IRS Notice 2020-15 to offer telehealth for any reason, not just treatment of COVID-19. See “IRS guidance on first-dollar coverage for COVID-19 testing and treatment,” Insider, March 2020.

2 See “Mandatory coverage of COVID-19 testing and small employer paid leave signed into law,” Insider, March 2020.

3 See “Substance use disorder confidentiality rules may impact contracts,” Insider, March 2020.

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Insider April 2020 PDF .4 MB

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Senior Regulatory Advisor, Health and Benefits

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