COVID-19: Health Plan Regulatory Issues

COVID-19 Update

This document summarizes regulatory issues for health insurers, managed care entities and employment-based health plans in light of the novel coronavirus outbreak. It briefly addresses state and federal issues in commercial health coverage and Medicare and Medicaid managed care.

Individual and Group Health Insurance Coverage and Employment-Based Health Plans

Coverage and cost-sharing for screening and diagnosis. Legislation Congress passed this week and the president is expected to sign would require group health plans and health insurance issuers in the individual and group markets to cover, without cost sharing, services related to COVID-19 testing and screening that are provided during an in-person or telehealth office visit, urgent care visit or emergency room visit. (H.R. 6201 § 6001 (as corrected) (116th Cong. 2d Sess.).) The new federal mandate would apply for the duration of the declared federal emergency. The mandate would apply to group and individual health insurance coverage and group health plans, including grandfathered health plans and self-insured group health plans. Several states have already required that state-regulated health insurers waive cost-sharing for these tests. Under existing law, if a vaccine were available (which is not currently true), once the CDC’s Advisory Committee on Immunization Practices (ACIP) recommends it, nongrandfathered group health plans and nongrandfathered health insurance coverage would be required to cover the vaccine with no cost-sharing, although plans and insurers would not be required to cover the vaccine until at least 12 months after the ACIP recommendation is released. Congress could eliminate this 12-month lag, but has not done so to date.

Coverage of treatment in individual market and small group health insurance. Nongrandfathered health insurance coverage in the individual and small group markets is required under federal law to cover the “essential health benefits” (EHB) package. Within federal guardrails, each state can define its own benchmark for what constitutes EHB. The Centers for Medicare & Medicaid Services (CMS) published FAQs on March 12 to clarify that “EHB generally includes coverage for the diagnosis and treatment of COVID-19.”1 The precise coverage details may vary by plan, including enrollee cost sharing, and prior authorization requirements. The guidance also addressed isolation and quarantine, describing these procedures as “generally covered as EHB” if required by a medical provider during a hospital admission, but not if “outside of a hospital setting.” Self-insured group health plans and large group health insurance coverage are not required to cover the EHB package, but, to the extent they cover benefits that are EHB, they may not impose annual or lifetime dollar limits on those benefits, and must limit enrollee cost-sharing on those benefits. Even though COVID-19 is a new disease, most group health plans generally cover medically necessary physician and hospital care, and so will offer some benefit for the disease, even if there is not a regulatory requirement to do so.

State regulation of health insurers. State insurance regulators are taking a range of actions to promote access to screening, diagnosis and treatments for COVID-19, though these actions do not reach self-insured private employer health plans, which are regulated solely by the federal government. Some states have requested insurers change benefit designs for COVID-19; others have required it. States are considering requiring or requesting that insurers waive cost-sharing for COVID-19 testing, treatment and (when available) vaccines, and some have temporarily suspended prior authorization for COVID-19. Some states are considering imposing benefit mandates on short-term limited duration plans, which are exempt from most federal health insurance regulation, and therefore may provide limited benefits for COVID-19.

Special enrollment periods. A growing number of the 13 state-based health insurance marketplaces have announced special enrollment periods (SEPs) with eligibility generally open to any currently uninsured individual otherwise eligible for ACA coverage. At last count, the list includes Massachusetts, Nevada, New York, Washington and Rhode Island, with California and Maryland also in the middle of SEPs that predate the COVID-19 crisis. States that rely on Healthcare.gov do not have the authority to hold SEPs, but at least two of those states, New Jersey and New Mexico, have called on Healthcare.gov to hold a national SEP. HHS has given no indication that it will do so given the adverse selection concerns, particularly because sellers of short-term plans may be looking to shed risk. Proponents of an SEP argue the need for coverage and note that heightened vulnerability may also increase interest in health security for those currently healthy.

Health savings account-eligible high-deductible health plans. On March 11, the Internal Revenue Service (IRS) published guidance on coverage for COVID-19 testing and treatment in high-deductible health plans (HDHPs).2 Individuals can contribute to a tax-favored health savings account only if they are enrolled in an HDHP that meets IRS requirements. Generally, an HDHP can cover only preventive services before a statutorily set deductible is satisfied. The March 11 IRS guidance said HDHPs may elect to pay benefits for coronavirus testing and treatment, even if the participant has not yet met the deductible. The IRS guidance is not mandatory: Plans could still choose to apply deductibles to these services.

Telehealth. States, plans and providers have been actively working to promptly establish new and expanded telehealth capacity. Some issues include requiring or requesting plans to:

  • Cover telehealth and not deny coverage based solely on the telehealth delivery of the service.
  • Develop robust telehealth coverage policies.
  • Cover telehealth in the home as a site source (unrestricted originating site).
  • Meet payment parity for telehealth. 
  • Allow out-of-state providers to deliver telehealth.  

Prescription drugs. States have acted to address plan coverage of drugs during the COVID emergency, including requiring or requesting plans to:

  • Cover off-formulary drugs if, due to supply chain problems, on-formulary drugs are not timely available. 
  • Allow early prescription refills (one-time or during the emergency).
  • Cover medication to treat COVID at preferred cost share, even if not otherwise a preferred drug. 

Network adequacy and surprise medical bills. States have addressed potential problems with provider access as COVID cases rise by requiring or requesting that plans conduct a network adequacy review to ensure excess capacity, cover out-of-network testing or treatment if there is a shortage of in-network providers, and allow expedited external appeals for any plan denials of out-of-network coverage. Pressure on networks from COVID cases could increase surprise medical bills from out-of-network providers. For states without existing protections, COVID could compel state action to protect consumers.

Insurer financial oversight. As COVID progresses, plans may be faced with unexpected costs. As a result, plans and regulators may have to address issues including:

  • Risk Adjustment. Will the federal risk adjustment formula properly take into account increased COVID costs, particularly in states with regional plans that may be differently impacted by the outbreak? If federal risk adjustment is insufficient, will states use the opportunity afforded under federal rules to make state adjustments to the federal program?
  • Reserves. Will COVID costs impact reserve levels of plans that already have solvency concerns (low risk-based capital levels)? If so, what relief can states offer, either funding or reserve flexibility? Is there a role for federal relief?

Medicare Advantage and Part D

On March 10, CMS clarified the special requirements that apply to Medicare Advantage (MA) and Part D plans under declared emergencies, as well as provided additional flexibility to Medicare plans for this emergency.3 While the March 10 memo referred to the eight states that had declared emergencies at that time, President Trump subsequently declared a national emergency on March 13, so the guidance in the memo should now apply nationwide.

Specifically, MA plans are required to:

  • Cover Medicare Parts A and B services and supplemental Part C plan benefits furnished at non-contracted facilities as long as facilities that furnish covered A and B benefits have participation agreements with Medicare.
  • Waive, in full, requirements for gatekeeper referrals where applicable.
  • Provide the same cost-sharing for the enrollee as if the service or benefit had been furnished at a plan-contracted facility.
  • Make changes that benefit the enrollee effective immediately without the 30-day notification requirement at § 422.111(d)(3). Such changes could include reductions in cost-sharing and waiving prior authorizations.

MA plans may also waive or reduce enrollee cost sharing for telehealth services, and may provide enrollees access to Medicare Part B services via telehealth in any geographic area and from a variety of places, including beneficiaries’ homes, during this period of emergency. The memo also addresses flexibilities Part D plans have to relax practices to ensure uninterrupted access to prescribed drugs.  

MA plans are authorized to waive or reduce enrollee cost-sharing for COVID-19 laboratory tests or for other services to address the outbreak. Medicare has been covering SARS-CoV-2 and COVID-19 testing at zero cost sharing for dates of service on or after February 4, 2020, thanks to a CMS interpretation that the tests fall under Part B’s coverage of clinical diagnostic laboratory services. H.R. 6201 confirms that coverage in the original Medicare and MA programs. It also inserts provisions that provide for zero cost sharing for certain evaluation and management services that result in or relate to COVID-19 testing or evaluation. Prior authorization and utilization management requirements for these services would be prohibited in the Medicare Advantage program. These provisions would be effective upon enactment and are applicable for the duration of the public health and national emergency period.

Medicaid Managed Care

Medicaid managed care plans (MMCPs) throughout the country have been dealing with many of the same issues as commercial plans: cost-sharing and preauthorization challenges, limitations of telehealth, provider network and drug access, and more. MMCPs are subject to an additional set of Medicaid program rules, such as face-to-face eligibility and enrollment encounters, in-person assessments and care management, and extensive documentation and data reporting requirements. States are assessing whether an 1135 federal waiver or other federal approvals are needed to allow for various flexibilities and taking action to allow for flexibilities that do not require federal approval.

New York Regulatory Action

On March 13, New York Governor Andrew Cuomo released a revised and expanded Executive Order, Executive Order 202.1, implementing measures to address challenges associated with the expansion of the COVID-19 outbreak in New York State. The Executive Order’s directive allows relevant agencies to suspend or modify, to the extent necessary, several Medicaid rules, including allowing certain screenings to be conducted by telephone; waiving or revising eligibility criteria, documentation requirements, or premium contributions; modifying covered healthcare services or the scope and level of such services set forth in contracts; and providing extensions for required reports due by approved organizations in accordance with contracts. The Executive Order also allows for the expansion of telehealth, including additional telehealth provider categories and modalities. In recent days, the State Department of Health has issued COVID-19 Medicaid-specific guidance related to the provision of home care services, home and community-based services, care management, telehealth, and the pharmacy benefit. Medicaid managed care plans have requested additional flexibilities, particularly relating to eligibility and enrollment, long-term care administrative processes, and reporting requirements. Additional guidance from the Department on these and other areas is expected in the coming days.

The New York Department of Financial Services has taken a series of administrative actions to improve access to care in health insurance, including requiring insurers to cover diagnosis and screening for COVID-19 without cost-sharing,4 and requiring that all services provided via telehealth be without cost-sharing, for the duration of the emergency.5

California Regulatory Guidance

On March 5, both the California Department of Insurance (CDI) and Department of Managed Health Care (DMHC) issued similar announcements, directing health insurers and managed care plans to reduce cost sharing to zero for medically necessary screening and testing for COVID-19, including the cost of office visits where the purpose is COVID-19 screening or testing. In addition to waiving cost-sharing, these insurers and plans must take measures to ensure providers and consumers are aware that this cost sharing is waived.6

The California Department of Health Care Services (DHCS)7 issued a memo on March 6 (updated March 16) stating that Medi-Cal managed care plans may reimburse for virtual communication where face-to-face communication should not or cannot occur (including brief provider-to-patient and provider-to-provider communication), building on existing Medi-Cal telehealth policy. The announcements from all three departments encourage insurers and plans to minimize COVID-19 transmission by working with contracted providers to expand telehealth services.

These announcements additionally direct plans to remove any prior authorization and/or step therapy requirements to ensure patients receive medically necessary medications in the case of a shortage. DHCS further directs Medi-Cal managed care plans to proactively ensure prescription medication access though strategies including coverage of drug delivery costs to coverage of maintenance medications at a minimum of a 90-day supply, among other steps.

1FAQs on Essential Health Benefit Coverage and the Coronavirus (COVID-19), https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/Downloads/EHB-Benchmark-Coverage-of-COVID-19.pdf.

2Notice 2020-15, https://www.irs.gov/pub/irs-drop/n-20-15.pdf.

3Information Related to Coronavirus Disease 2019 - COVID-19, https://www.cms.gov/files/document/hpms-memo-covid-information-plans.pdf.

411 N.Y. Comp. Codes R. & Regs. § 52.16(p), https://www.dfs.ny.gov/system/files/documents/2020/03/re62_57_text.pdf.

5Id. § 52.16(q), https://www.dfs.ny.gov/system/files/documents/2020/03/re62_58_amend_text.pdf.

6California Department of Insurance, Bulletin: COVID-19 Screening and Testing, March 5, 2020; DMHC, APL-20-006 COVID-19 Screening and Testing, March 5, 2020.

7DHCS, Memo to All Medi-Cal Managed Care Health Plans, UPDATED COVID-19 Screening and Testing, March 16, 2020.

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