Paying for OTC COVID-19 Tests –3 Best Practices for Plan Sponsors

March 2, 2022

By Joseph M. DiBella

For much of the COVID-19 pandemic, testing has served a vital function as a tool to help slow the spread of the virus. Testing helps individuals manage their activities and reduce their exposure. It helps communities and organizations measure cases and more accurately estimate and respond to risk.
As the highly transmissible Omicron variant swept the nation, surging cases and breakthrough infections further drew testing into the public spotlight. People were eager to get tested before gatherings and events, and more and more organizations began requiring negative tests for various situations.

As the demand for ongoing testing grew, early this year the Biden administration issued a mandate that group health plans must cover over-the-counter (OTC) COVID-19 tests.

On the surface, the rule sounds relatively simple: Health plans must cover eight individual at-home OTC COVID-19 tests per person enrolled in the plan per month. But the broad mandate was issued quickly and with little warning, leaving many insurance providers, as well as employers and plan sponsors, to quickly navigate the nuances of the rule and scale up an offering for members and employees – including grappling with this new cost to absorb.

Key Details About the Requirement to Pay for COVID-19 Tests

For fully insured plans, the new requirement means insurance carriers will pass along the increased cost in premiums, while self-funded plans will have to deal with the direct expense of the tests. It’s not hard to see how these costs could add up quickly. Under the requirement, a family of four would qualify for up to 32 tests a month. And there’s no end date to the requirement – employers will be expected to cover this into the future, when a new COVID-19 variant or surge in caseloads could drive another increased demand for testing.

Plans must provide the tests with no out-of-pocket expense to the participant. Logistically, that means members can obtain the tests in one of two ways. The first is for plans to establish a point-of-sale (POS) solution with a pharmacy benefits manager (PBM) in which the PBM is reimbursed directly for the tests. In this scenario, a member goes to the preferred PBM (CVS, Walgreens, etc.), presents their insurance card, and receives the test at no cost. Plans are “strongly encouraged” to provide this direct coverage under the rule. The second option is for members to submit receipts and be reimbursed for their purchase. This reimbursement can be limited to $12, provided the plan also offers direct coverage.

Additionally, it’s important to note the requirement is only intended to cover “diagnostic” OTC tests, even though there is no requirement that a medical provider be involved. Recurring tests for employment purposes (also referred to as surveillance tests) are not covered under the requirement.

3 Best Practices for Communicating with Members and Minimizing Costs

With these considerations in mind, there are a few steps plans and benefits pros can take to help minimize the impact of the rule without falling out of compliance or limiting individuals’ ability to access this essential pandemic tool.

1. Set up a POS solution – and encourage members to use it

The rule “strongly encourages” direct coverage, and when structured correctly, this format can be a win-win for plans and members. PBMs can negotiate better pricing with network partners and provide more predictable costs for plans. It’s also a more streamlined way for members to get access to tests at the same location where they pick up other medications.

Most PBMs and health plans have the technology and capabilities to establish the direct coverage with no additional costs. Make sure the user experience is easy, and communicate to members that they should first look to use this convenient option for their testing needs, rather than submitting a receipt and potentially not receiving the full refund for the cost of the test.

2. Alert members to free tests

In addition to requiring insurers to pay for COVID-19 tests, the Biden administration also instituted a plan to send four free COVID-19 tests to any household that requests them. Use communications channels to ensure members are aware of these free tests and underscore that this is the most convenient way to receive tests. Provide support for employees to sign up — more details are available at

3. Plan for future uncertainty

As we emerge from the surge of cases prompted by the Omicron variant, the demand for testing has dipped. However, future variants or surges may create high demand for testing again. In these cases, availability may become an issue with established PBMs, and plans may see a surge in reimbursement requests. Organizations should prepare for these uncertainties as best they can.

The Impact of COVID-19 on Benefits Plans and Costs

These testing costs alone are unlikely to have a significant impact on the healthcare spend for most organizations and plans. However, they are a sign of shifting headwinds with regards to the COVID-19 pandemic and the costs associated with it. Combined with other factors like avoided or delayed care, this testing requirement is a sign that COVID-19 can have a chilling effect on healthcare premiums.

The experts at Conner Strong & Buckelew have the expertise and insights to help employers and plan sponsors navigate these test coverage requirements and the larger looming impacts of COVID-19. Get in touch today to learn how we can help minimize the impact of the pandemic and ensure members have the education and protection they need.


Employee Benefits, Risk Management

Practice Leader

Joseph M. DiBella

Executive Partner, National Employee Benefits Practice Leader

More than 27 years of employee benefits experience

Previously led national and large account business for Horizon Blue Cross Blue Shield of New Jersey