On March 27, 2020, President Trump signed the largest economic stimulus bill in US history: the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act provides resources to support our health care system in the fight against the COVID-19 pandemic, cash and other forms of relief for individual citizen; loans and other assistance to small businesses; and assistance for certain hard-hit industries. Many of the changes affect or have implications for employee benefit programs and other aspects of employee compensation. In our blog entry from March 27, we provided a high level summary of the legislation as it affects executive compensation, retirement and health and welfare plans, and employment taxes. In the first of a series, we look at the provisions affecting health and welfare plans in more depth.

Coverage of COVID-Related Services

Group health plans and health insurers are now required to cover qualifying items, services, or immunizations intended to prevent or mitigate COVID-19 (referred to as qualifying coronavirus preventive services) without imposing any cost-sharing. In order to be covered, the services must be either (i) an evidenced-based item or service that has a rating of “A” or “B” in the current recommendations from the United States Preventive Task Force, or (ii) an immunization with a recommendation from the Advisory Committee on Immunization Practices of the Centers for Disease Control and Prevention. Coverage of any qualifying coronavirus-preventive service must be effective no later than fifteen (15) business days after the effective date of the applicable recommendation.

The previously-enacted Families First Coronavirus Response Act (signed into law on March 18, 2020) required group health plans and health insurers to cover the cost of in vitro diagnostic tests for COVID-19 that have already been approved for use pursuant to the Federal Food, Drug, and Cosmetic Act (“FFDCA”), as described in our earlier alert. The CARES Act expands the types of covered tests to include tests that have been submitted for approval for emergency use pursuant to the FFDCA, as well as tests developed in and authorized by any state that has notified the Secretary of Health and Human Services (“HHS”) of its intention to review COVID-19 diagnostic tests.

The CARES Act requires group health plans and health insurers to reimburse COVID-19 diagnostic testing providers at the health plan’s or issuer’s negotiated rate with the provider, as in effect before the COVID-19 public health emergency (declared on January 31, 2020 to exist retroactive to January 27, 2020). If the health plan or issuer does not have a negotiated rate with a provider, the plan or issuer must reimburse the provider for the service’s cash price listed on the provider’s website, or the plan or issuer may negotiate a lower rate with the provider. In that regard, each provider of COVID-19 diagnostic tests is required to publish the cash price of its COVID-19 diagnostic tests on its public website. The HHS Secretary may impose a penalty of up to $300 per day of violation on providers that fail to do so.

Telehealth Services

Similar to earlier relief issued by the Internal Revenue Service for coverage of testing and treatment for COVID-19 (discussed here), high deductible health plans may now provide coverage for telehealth services without a deductible, without jeopardizing the plan’s status under the Internal Revenue Code, if the plan sponsor adds this optional provision to its plan. This flexibility applies for plan years beginning on or before December 31, 2021.

Expansion of FSAs, HSAs

Effective January 1, 2020, individuals may use health savings account and Archer medical savings account funds to purchase over-the-counter medicines without a prescription, and to purchase menstrual care products. Similarly, plan sponsors may amend their plans allow for those reimbursements from health flexible spending accounts. (The changes relating to over-the-counter medications restore flexibility that was in place prior to the Patient Protection and Affordable Care Act.) We expect that most employers will want to expand coverage under their health flexible spending accounts to implement these changes.

Employer Payments of Student Loans

The CARES Act provides temporary tax-free status to certain educational assistance payments made by an employer. Effective from March 28, 2020 through December 31, 2020, an employer may make payments up to $5,250 per year to an employee or to a lender, of principal or interest on any “qualified education loan,” and these payments will not be treated as taxable income to the employee. Qualified education loans are those that were incurred by the employee for his or her higher education expenses, and they include, but are not limited to, loans for tuition, fees, books, supplies, transportation, equipment, room and board.

Sponsor/Plan Administrator Considerations Related to Health and Welfare Plan Provisions

  • Consider permissible changes for high deductible health plans and what limits might be set on such items and services; adopt amendments to effectuate desired changes (g., whether or to what extent to allow COVID-19 treatment and telehealth services pre-deductible).
  • Coordinate with insurers, third party administrators and stop-loss providers to implement any amendments.
  • Review permissible changes and amend health flexible spending account plans to implement desired changes (g., to permit reimbursement for over-the-counter medications and menstrual care products).
  • Distribute summaries of material modifications reflecting changes to applicable plans.
  • If interested in making student loan payments for employees, adopt written plan under Section 127 of the Code.


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