CARES Act's Key Provisions Impact On Welfare and Fringe Benefits

March 30, 2020

By Joshua M. Osborne and Alexandra A. Ifrah

As a follow-up to the Families First Coronavirus Response Act (FFCRA), the CARES Act both clarifies and expands on the COVID-19 related coverage requirements applicable to group health plans (including grandfathered health plans) and health insurance issuers. The CARES Act includes key provisions impacting certain welfare and fringe benefits including HSA’s and educational assistance programs.

COVID-19 Testing – FFCRA previously established the requirement for group health plans and health insurance issuers to provide no cost coverage for COVID-19 testing (including administration of the test and the associated urgent care, emergency or health provider office visit). In recognition of the expanding need for additional testing processes, the CARES Act provides that, in addition to in-vitro diagnostic tests approved by the FDA, group health plans and health insurance issuers must also provide no cost coverage for testing 1) from a developer that requests or intends to request an emergency use authorization, 2) that is developed in a State that has notified the Secretary of Health and Human Services of its intention to review tests intended to diagnose COVID-19 or 3) any other test the Secretary determines is appropriate. Assuming such testing satisfies these requirements, the group health plan or health insurance issuer will be prohibited from applying any co-insurance, deductible, or copayment to the COVID-19 test, the administration of the test or the associated health care visit.

In connection with coverage for COVID-19 testing, the CARES Act addresses the reimbursement rate for such testing by requiring group health plans and health insurance issuers to reimburse the provider at the negotiated rate. If the plan or issuer has not negotiated a rate of reimbursement with the provider, the plan or issuer will be required to reimburse the provider at the cash price, which the provider is required to list on a public internet website. Alternatively, the plan or issuer may negotiate with the provider at less than the published cash price. In this regard, providers are required to publish the listed cash price for COVID-19 testing during the emergency period or be subject to civil monetary penalties of up to $300 per day.

Preventive Care – In addition to mandatory coverage requirements in connection with COVID-19 testing, the CARES Act anticipates the need for comprehensive coverage for immunizations and treatment for coronavirus by expanding the definition of preventive health services under Section 2713(a) of the Public Health Services Act to include “qualifying coronavirus prevention service.” The intent of the law is to ensure that all plans and issuers currently required to cover 100% of the cost of preventive care services will also be required to cover any qualifying coronavirus prevention service once such services become available.

 For this purpose, a qualifying coronavirus prevention service is defined to include an item, service, or immunization intended to prevent or mitigate coronavirus that either has an “A” or “B” recommendation by the United States Preventive Services Task Force or that is on the list of recommended immunizations published by Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention. Unlike the typical timeline for coverage of other preventive health services, group health plans and health insurance issuers will be required to provide coverage for the qualifying coronavirus prevention service within 15 business days following the date the recommendation is made.

 Because qualifying coronavirus prevention service is considered preventive care, plans will be required to provide coverage for such service in the same manner as other types of preventive care services, which means that coverage must be covered 100% by the plan without applying any co-insurance, deductibles or co-payment. Because grandfathered health plans are technically exempt from the requirement to provide no-cost coverage of preventive care services, it remains to be seen whether clarifying guidance may be issued to ensure that there are no gaps in the plans required to cover 100% of the cost of immunizations and treatments to prevent or mitigate coronavirus.

Health Savings Account – The CARES Act also implements two key provisions affecting HSA eligibility and the expenses that may be reimbursed through an HSA. First, for plan years beginning before December 31, 2021, a plan’s status as a high deductible health plan for purposes of HSA eligibility will not be jeopardized solely because the plan does not apply a deductible to Telehealth or other remote services. This coverage relief is particularly important in light of the fact that all plans are required to provide no-cost coverage for healthcare provider visits in connection with COVID-19 testing and many providers have indicated that the lack of treatment codes will make it difficult to determine whether a particular Telehealth visit relates to COVID-19 testing.

The CARES Act also amends the definition of “qualifying medical expenses” for purposes of HSA reimbursements to treat the payment of over-the-counter medicine and drugs as well as menstrual care products as being paid for the purpose of medical care. This means that individuals will be permitted to pay for over-the-counter drugs and medicines as well as menstrual care products on a tax-advantaged basis through their HSA. Over-the-counter drugs and menstrual care products will also be treated as amounts paid for medical care in connection with health flexible spending accounts as well as health reimbursement arrangements and Archer MSA’s.

Exclusion for Employer Payments of Student Loans

The CARES Act allows employers to provide student loan repayment benefits to employees on a tax-free basis by amending Code Section 127(c) dealing with Educational Assistance Programs. For the period between the enactment of the CARES Act and before January 1, 2021, an employer may make payments up to $5,250 per calendar year, of the principal or interest, on any qualified education loan incurred by the employee for the education of the employee. The payments may be made to the employee or to the lender and such payments would be excluded from the employee’s gross income. The maximum amount of $5,250 applies to all educational assistance benefits currently provided, if any, in addition to this new student loan repayment provisions as well as all other applicable requirements of Section 127 of the Code. 

Alexandra A. Ifrah is a partner in the Employee Benefits Practice Group of Friday, Eldredge & Clark and serves on the firm's Management Committee. Since joining the firm in 1999, Alexandra has concentrated her practice on the representation of employers from a myriad of industries in complex employee benefits, taxation and executive compensation matters. 

 Joshua M. Osborne is a partner in the firm’s Employee Benefits and Executive Compensation Practice Group. His practice focuses on providing counsel to clients on all aspects of their welfare benefits, retirement plans and executive compensation arrangements. 

Disclaimer: The information included here is provided for general informational purposes only and should not be a substitute for legal advice nor is it intended to be a substitute for legal counsel. For more information or if you have further questions, please contact one of our Attorneys.