Employer-Provided COVID-19 Testing: An Employee Benefits Q&A
Although the fate of the Occupational Safety and Health Administration’s (OSHA) rules remains in limbo, many employers are moving ahead with efforts to comply with the OSHA emergency temporary standard (ETS) that requires employers with 100 or more employees to ensure that all are fully vaccinated or subject to COVID-19 testing at least weekly.
Those efforts are raising a range of employee benefits questions and below we answer some of the questions employers often ask.
Question 1. Does a medical plan have to cover all testing for unvaccinated employees enrolled in coverage?
Answer 1. No. The Coronavirus Aid, Relief, and Economic Security (CARES) Act requires medical plans to pay for COVID-19 testing when a medical professional has made an individualized determination that testing is medically appropriate. That determination might be based on an individual’s symptoms or potential exposure. However, the CARES Act does not require medical plans to pay for testing that is not based on a clinical determination that testing is appropriate. Specifically, coverage is not required when testing is done for employment-related reasons. Nearly all plans are currently written so that they do not cover testing when it has not been ordered by a medical professional making an individualized determination that testing is medically appropriate. Employers may want to review their medical plan documents to determine what kinds of testing are covered.
Q2. If a plan does not currently cover employment-based testing, may it be amended to do so?
A2. Yes, though not many employers are likely to do this. Covering all COVID-19 testing could significantly raise costs. Insurers would want to raise premiums, and self-insured plans could face higher stop-loss premiums. In addition, changing a medical plan’s administration can be a bit tricky. Most plans only cover services that are “medically necessary” as an overall medical management technique. By carving COVID-19 testing out of the “medically necessary” requirement, an employer might be creating a unique coverage framework that an insurer or third-party administrator might not be equipped to handle. Finally, only employees who are already covered by a medical plan can have their testing covered. That means employers may want to consider how noncovered employees will get tested.
Q3. The ETS does not require employers to pay for employment-based testing. Are there factors employers may want to consider if they want unvaccinated employees to pay for their own testing?
A3. Although the ETS itself does not require employers to pay for testing for unvaccinated employees, there could be other laws that make it difficult for employers to pass the cost of testing on to employees. Certain state laws may require employers to pay for testing. Some state laws require employers to pay, generally, for any items that are required as a condition of employment. Other state laws specifically require employers to pay for any required medical tests. Also, union contracts may require employers to pay for testing. Employers may want to review any collective bargaining agreements carefully to determine whether employee-paid testing, or even testing itself, requires reopening the agreement.
Q4. What if an employer decides to pay for employment-based testing outside of the medical plan?
A4. A COVID-19 diagnostic test would most likely be considered medical care under the Employee Retirement Income Security Act (ERISA). So when an employer pays for testing, regardless of the reason, it likely pays for medical care. This creates an ERISA-covered welfare benefit. Recent federal guidance indicates that employers can offer testing through an employee assistance plan (EAP) without the EAP offering “significant” medical care. This is important because EAPs that do not offer “significant” medical care are “excepted benefits,” meaning they are not subject to various laws that would otherwise apply to group health plans. For this reason, employers that want to provide free testing may want to consider labeling their programs as standalone EAPs.
Many employers are considering offering free testing at worksites, which may prompt privacy questions related to the Health Insurance Portability and Accountability Act of 1996 (HIPAA). Before releasing results to an employer, a testing provider will need a proper authorization from the employee. Alternatively, the testing provider could provide test results directly to the employee, who might then provide the test results to the employer. HIPAA does not apply to employees providing their own medical information. Note that even if HIPAA-level protections do not apply, employees’ testing information is still sensitive medical information that employers are required to safeguard appropriately.
Q5. If an employer pays for employment-based testing, are employees subject to a tax on the cost of the testing?
A5. COVID-19 diagnostic testing would most likely be considered medical care under the tax code and could be provided to employees tax-free. This would be true whether the test is ordered by a physician or done for employment purposes.