Employer-Sponsored Health and Welfare Benefit Plan Changes Under the CARES Act

Charles Newman, of counsel with Sills Cummis & Gross P.C., explores recently enacted programs and provisions impacting employers providing health and welfare benefit plans.

Amid the flurry of newly enacted programs and laws included in the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) signed into law on March 27, 20201, are provisions that have significant impacts on health and welfare benefit plans provided by employers. This article summarizes the key provisions affecting such plans.

Coverage of Diagnostic Testing

Section 3201 of the CARES Act expands upon the diagnostic tests and services initially provided for under the Families First Coronavirus Response Act (FFCRA) signed into law on March 18, 2020.2

Section 6001(a) of the FFCRA required all group health plans and health insurance issuers offering group or individual health insurance coverage to provide coverage for diagnostic testing for the virus causing COVID-19, without any cost sharing, including deductibles, copayments and coinsurance, and without requiring prior authorization or satisfaction of any other medical management requirements. This mandate was limited, however, to the cost of FDA approved diagnostic products, and any services furnished during an office visit that resulted in the ordering or administration of the test. The FFCRA made clear that only services related to furnishing the test and evaluation for the purpose of determining the need for the test.

The CARES Act expands the type of testing that is covered to include the following:

  • tests developed where the developer has requested or intends to request emergency use authorization from the FDA unless and until the request is denied or a request is not submitted within a reasonable time;
  • tests developed and approved by a State, where the State has notified the Secretary of Health and Human Services (HHS) that it intends to review such tests; and
  • any other tests that HHS approves in guidance.

Pricing of Diagnostic Testing

Section 3202(a) of the CARES Act includes a provision governing the pricing of the diagnostic testing services required to be covered under Section 3201.

  • If the health plan or health insurance issuer had a negotiated rate in place with a provider for the covered services prior to the declaration of the public health emergency, that rate must be honored throughout the duration of the emergency.
  • If there was no such rate negotiated prior to the emergency declaration, as would be the case for out-of-network providers, the plan or issuer is required to reimburse the provider at the cash price published by the provider on its website, unless a lower rate is negotiated.

Disclosure of Diagnostic Test Pricing

As a corollary to the pricing provisions of Section 3202(a), Section 3202(b) requires any provider of a covered diagnostic test to publish its cash price for the test on its publicly available website. It is worth noting that no alternative means of publication is indicated for sole practitioners and other small practices that do not necessarily maintain a website. Though such practices are becoming less and less common, they do continue to exist.

Any provider that is not in compliance with these pricing disclosure requirements and has not completed a corrective action plan to comply with such requirements will be subject to a civil monetary penalty in an amount not to exceed $300 per day for each day that the violation exists.

Rapid Coverage of Preventive Services and Vaccines

Under the Affordable Care Act (ACA), non-grandfathered health plans are required to provide coverage, without any cost-sharing, for certain preventive services, including:

  • “(1) evidence-based items or services that have in effect a rating of “A” or “B” in the current recommendations of the United States Preventive Services Task Force; and
  • “(2) immunizations that have in effect a recommendation from the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention with respect to the individual involved.”

Mandatory coverage would begin for the plan year that begins one year after the applicable recommendation.3

The CARES Act makes the foregoing provision applicable to any “qualifying coronavirus preventive service,” which is defined as an item, service or immunization intended to prevent or treat COVID-19. Furthermore, it requires coverage of a qualifying coronavirus preventive service to commence within fifteen (15) days after the applicable recommendation.

Unlike many other provisions of the CARES Act and the FFCRA, which apply only during the declared emergency, the accelerated mandatory coverage for coronavirus preventive services is permanent.

Telehealth Services

Certain tax-favored contributions by an individual to a health savings account (HSA) are permitted if the individual is covered by a “high deductible health plan” (HDHP) as defined in Section 223(c)(2) of the Internal Revenue Code. The IRS previously issued a notice on March 15, 20204 whereby a plan would still be considered a HDHP, thereby allowing contributions to an HSA, notwithstanding that the plan covered testing and treatment related to COVID-19 with no deductible or a lower deductible than the applicable threshold. Under Section 3701 of the CARES Act, an additional safe harbor was created whereby a plan will not fail to be treated as an HDHP solely because it fails to have a deductible for telehealth and other remote care services. This safe harbor provision only applies to plan years beginning on or before December 31, 2021.

Over-the-Counter Medical Products

Prior to enactment of the Affordable Care Act (ACA), various over-the-counter medical products were considered “qualified medical expenses” that could be paid for with HSA funds. The ACA inserted the following sentence at the end of Section 223(d)(2)(A) of the Internal Revenue Code:

Such term shall include an amount paid for medicine or a drug only if such medicine or drug is a prescribed drug (determined without regard to whether such drug is available without a prescription) or is insulin.

Section 3702 of the CARES Act repeals the above quoted sentence, thereby restoring the ability to use an HSA to pay for over-the-counter medical products. It also adds a provision allowing HSAs to be used to pay for menstrual care products. It also makes similar revisions to Sections 106 and 220 of the Code with respect to Archer MSAs.


The key measures specifically targeted at the current public health emergency - expanded availability of coverage for coronavirus testing, accelerated coverage for preventive services and vaccines once they become available, and expanded availability of telehealth services – promise to make testing, treatment and prevention more widely available to participants in employer sponsored health plans. Not only are these important measures from a strictly humanitarian perspective, but they will hopefully contribute to a shortening of the duration of the current emergency, maintenance of a healthy work force, and resumption of normal business activities. Furthermore, the expanded coverage for telehealth services, if shown to be effective, has the potential to make healthcare more affordable and accessible beyond the current emergency.

Published .