CARES Act – Impact on Health Plans


With the outbreak of the 2019 novel Coronavirus (the “Coronavirus”) and the illness it can cause (“COVID-19”), Congress has now enacted the third of three major “phases” of legislation. A “phase four” bill is also being promoted by Democrats (and some Republicans).

Below we discuss the CARES Act and its impact on health insurers, plan sponsors and third party administrators (“TPAs”). 

Coronavirus Testing – Updates to FFCRA

As noted above, the FFCRA generally requires coverage of Coronavirus testing. The CARES Act made some tweaks to how the test is defined. Thus, the CARES Act definition – not the FFCRA definition – should be used.

One question which was not clear under the FFCRA was what cost providers and test-kit-makers could charge for the Coronavirus test. The CARES Act sets a rate which the insurer or plan must pay, as follows:

  • If the insurer or plan had a negotiated rate with the provider before the Coronavirus public health emergency was declared, that negotiated rate applies while the emergency declaration is still in force.
  • If there is no such negotiated rate, the amount the plan or insurer must pay is the amount that “equals the cash price for such service as listed by the provider on a public internet website”, or the price the parties negotiate for less than the cash price.

These provisions are rather ambiguous. For example, which “public internet website” applies? What if the price changes? Is the “controlling price” (our term) the price on the date that the test is administered or the price on the date that the claim is processed by the insurer or plan? If it is the former, how would a plan or insurer track the price and website when the plan or insurer may not know what terms of the website were in effect when the Coronavirus test was administered? Must the provider keep a record of website prices by date (in the event the prices change)? What would be acceptable proof of the website terms in that situation? The provision raises a host of administrative questions.

Preventive Services and Vaccines

Under the Affordable Care Act (“ACA”), many types of preventive care services must be provided on a “free” basis (before the deductible and with no cost-sharing). Normally the process of adding new services as “preventive” can take a few years. The CARES Act tries to “speed up” that process for any “qualifying coronavirus preventive service”. If such a preventive service (such as a vaccine) becomes available, the insurer or plan may need to cover it within 15 business days after the recommendation is made by the relevant governmental committee. The provision does not seem to require any current action by insurers or plan sponsors.

Telehealth Services

In order to establish or contribute to an HSA, an individual generally must have high-deductible health plan (“HDHP”) coverage and no non-HDHP coverage. “Telehealth” services, where the patient and doctor communicate remotely, has grown in popularity. That is especially true with respect to the Coronavirus, where physical distance can be safer than close contact. However, from an HSA perspective, that telehealth benefit could be considered “non-HDHP” coverage if the benefit was provided, at no or reduced cost, before the plan’s deductible was satisfied.

The CARES Act provides relief for “telehealth and other remote care services”. Such coverage can be provided on a pre-deductible basis without the HDHP losing its HSA-favored status. This is generally favorable. However, note that the provision is scheduled to sunset in 2022.

Over-the-Counter Drugs

Under the ACA, over-the-counter drugs generally could not be reimbursed under a health FSA or HRA unless the drug had a prescription associated with it, or was insulin. The CARES Act reverses this rule. We expect that most plan sponsors, TPAs and employees will be pleased with this change. However, note that many Health FSAs and HRAs specifically prohibit coverage of this type of expense. Presumably a plan amendment will be required before the change can be implemented because the CARES Act does not require the change to be made (it is discretionary).

Menstrual Care Products

The CARES Act provides that menstrual care products are covered as “medical care” expenses for health savings account (“HSA”), Health FSA and HRA purposes. Again, we expect that most plan sponsors and employees will welcome this change.

Part 2 Privacy Rules 

Many plan sponsors and TPAs have been reviewing their compliance with certain “Part 2” privacy requirements relating to drug and alcohol coverage, which became effective in February 2020. See the Quarles & Brady alert here: The CARES Act makes some changes in this area, apparently in an effort to harmonize how these “Part 2” privacy rules work with the HIPAA Privacy Rules.

Fringe Benefit Plans: Student Loans 

The CARES Act provides an exclusion from income for employer-paid student loan repayment assistance. The income exclusion is capped at $5,250. Certain requirements, such as having a written program, are likely required. Note that the exclusion only applies through the end of 2020, but it is possible that it will be extended.

"Next Phase" To Be Determined

Democrats in the House have already announced interest in a “phase four” Coronavirus law. Republican reaction has, so far, been mixed. Any such law would likely contain some health plan provisions. For example, a proposed Democratic bill would require the federal government to subsidize the cost of COBRA coverage.

Both the House and the Senate are currently in recess. Thus, it is not clear when a “phase four” bill would be considered.

This is a fluid and rapidly changing situation and these resources are current only as of the date of publication. We recommend that you contact your local Quarles & Brady attorney regarding the most up-to-date information or with any other questions regarding this subject matter, or contact 

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