30 March 2020

Health Benefit Plan Provisions in the CARES Act

***Information and guidance in client updates was up to date at time of publication. During the pandemic, information and guidance has been changing rapidly. If you have any questions about the information contained in a client update, please contact the author(s) or your Miller Johnson attorney.***

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), which became law on March 27, 2020, contains a number of provisions that impact employer-sponsored health benefit plans.  While many of those provisions address issues created by the COVID-19 pandemic, other provisions are unrelated to COVID-19.  In this client update, we provide both the “highlights” of the COVID-19-related health plan provisions and a more detailed explanation of all of the health (and welfare) plan-related provisions.  We ordered our explanation of these issues by presenting those that are more pressing for employers (in response to COVID-19) first.

COVID-19 Highlights

  • Telehealth and HDHPs. Until plan years beginning on or after January 1, 2022, a high deductible health plan (“HDHP”) will not fail to be a HDHP (and jeopardize the HSA-eligibility of its participants), even if the HDHP does not impose a deductible on any services provided by telehealth or in other remote care settings.
  • Expansion of COVID-19 Tests that Must be Covered with No Participant Cost-Sharing. The CARES Act expands the types of COVID-19 tests that must be covered by a group health plan with no participant cost-sharing.
  • Reimbursement Rates for Group Health Plans for Required COVID-19 Testing. Group health plans may reimburse providers based on the negotiated rate with the provider for COVID-19 tests that existed as of January 27, 2020 until the declaration of the COVID-19 public health emergency expires.  If a group health plan does not have a negotiated rate with a provider, it must reimburse the provider using the cash price that is listed by the provider on a public internet website, unless a lower rate is negotiated.
  • COVID-19 Preventive Care Services under the ACA. For new COVID-19 preventive care services (including immunizations) required under the ACA, group health plans must begin covering those preventive care services with no participant cost-sharing by the 15th business day after the new preventive care service is recommended.
  • HHS Guidance on Sharing PHI During COVID-19 Pandemic. The Department of Health and Human Services (“HHS”) must issue additional guidance on sharing Protected Health Information (“PHI”) under the HIPAA privacy rule during certain periods related to the COVID-19 pandemic.

Detailed Explanation of COVID-19-Provisions

  1. Exemption for Telehealth Services provided by HDHPs (Section 3701)


In IRS Notice 2020-15, the IRS clarified that a HDHP “will not fail to be a HDHP merely because [it] provides medical care services and items purchased related to testing for and treatment of COVID-19 prior to the satisfaction of the applicable minimum deductible” (see our client alert here).   In other words, an individual covered by a HDHP will remain HSA eligible, even if the HDHP provides coverage for testing and treatment of COVID-19 before the minimum HDHP deductibles are satisfied.

This is welcome relief because the Families First Coronavirus Response Act (“FFCRA”) requires all group health plans, including HDHPs, to cover the diagnosis of COVID-19 without participant cost-sharing, such as deductibles (see our client alert here).  This requirement under the FFCRA applies to all settings, including telehealth.

We have heard numerous stories that carriers cannot differentiate between telehealth services that are for the required COVID-19 services or for other medical services.  So these carriers are now providing all telehealth services without participant cost-sharing to comply with the FFCRA.  This caused concern for employer-sponsors of HDHPs because these non-COVID-19 telehealth services fall outside of the relief in IRS Notice 2020-15 jeopardizing the health plan’s HDHP-status and the HSA-eligibility of the participants in the HDHP.

Temporary Relief

The CARES Act provides employer-sponsors of HDHPs with temporary relief from these concerns.  For plan years beginning before December 31, 2021, a HDHP will not fail to be treated as a HDHP because it does not impose a deductible on any services provided by telehealth or in other remote care settings (not just COVID-19-related services).  Unless the relief is later extended, HDHPs will need to subject telehealth services to the HDHP’s minimum deductibles—at least those that are not COVID-19-related—beginning with the HDHP’s plan year that begins on or after January 1, 2022.

  1. Coverage of Diagnostic Testing for COVID-19 (Section 3201)

The CARES Act amended the provision related to the coverage of diagnostic testing under the FFCRA.  We discussed the requirement for group health plans to cover diagnostic testing of COVID-19 with no participating cost-sharing in our previous client alert, which is available here.  The FFCRA generally required group health plans to cover tests that were approved under the Federal Food, Drug and Cosmetic Act (“FDCA”).  The CARES Act expands this coverage requirement to the following tests.

    • Tests in which the developer has requested (or intends to request) an emergency use authorization under the FDCA.  These tests are required to be covered with no participant cost-sharing unless the authorization has been denied or the developer doesn’t timely submit its request.
    • Tests that are developed under an authorization by a state that has notified the HHS of its intention to review the test.
    • Any other test that the Secretary of HHS determines is appropriate.
  1. Reimbursement Rates by Group Health Plans for COVID-19 Testing (Section 3202)

With respect to the pricing of the required COVID-19 diagnostic testing, a group health plan may rely on the negotiated rate (if any) with a provider that existed as of January 27, 2020 (i.e., the date that the Secretary of HHS declared a public health emergency for the entire United States).  That negotiated rate will continue to apply until this declaration expires.

If a group health plan does not have a negotiated rate with a provider, the group health plan must reimburse the provider for the required COVID-19 diagnostic testing in “an amount that equals the cash price for such service listed by the provider on a public internet website,” unless the group health plan negotiates a lower rate.  In turn, providers of COVID-19 diagnostic tests are required to publish the cash price for the test on a public internet website.

  1. COVID-19 Preventive Care Services (Section 3203)


Under the Affordable Care Act (“ACA”), non-grandfathered group health plans are required to cover certain preventive care services on with no participant cost-sharing.  The required preventive care includes (but is not limited to):

    • Evidence-based items or services that have a rating of A or B recommended by the United States Preventive Services Task Force (“USPSTF”).
    • Immunizations for routine use in children, adolescents, and adults that have a recommendation from the Advisory Committee on Immunization Practices of the CDC.

When the USPSTF issues a new recommendation of an A or B rating for a preventive care service or the CDC issues a new recommendation for an immunization, a group health plan must cover that preventive care service or immunization with no participant cost-sharing beginning in the first plan year that begins on or after one year after the date of the new recommendation.

COVID-19 Preventive Care Services and Immunizations

If the USPSTF issues a recommendation of an A or B rating for a preventive care service that is related to COVID-19, or the CDC issues a recommendation of an immunization that is related to COVID-19, group health plans must cover that preventive care service or immunization by the 15th business after the date of the recommendation.  Group health plans will need to respond quickly to this accelerated effective date.

  1. Disclosures of COVID-19 Related PHI (Section 3224)

No later than September 23, 2020, the CARES Act directs the Secretary of HHS to issue guidance on the sharing of PHI under HIPAA during the following periods with respect to COVID-19:

    • A public health emergency declared by the Secretary of HHS;
    • An emergency declared by the President in which the federal government has the primary responsibility for response (i.e., under Section 501(b) of the Robert T. Stafford Act); or
    • A national emergency declared by the President under the National Emergencies Act.

This guidance must include information on the sharing of PHI during these periods in compliance with the HIPAA privacy rule and other applicable policies, such as polices that are issued during such periods.

Detailed Explanation of Other Health and Welfare Plan Provisions

  1. Coverage of OTC Drugs and Menstrual Care Products by HSAs, FSAs, HRAs, and Archer MSAs (Section 3702)

Beginning January 1, 2020, an individual may use a Health Savings Account (“HSA”) or Archer Medical Savings Account (“MSA”) to pay for over-the-counter (“OTC”) drugs without a prescription, and menstrual care products.  Similarly, a participant in a Health Flexible Spending Account (“FSA”) or a Health Reimbursement Arrangement (“HRA”) may be reimbursed from the Health FSA or HRA for expenses incurred for OTC drugs without a prescription, and menstrual care products.

The CARES Act eliminates an ACA rule that confined tax-free reimbursement from these accounts and arrangements to drugs that were either insulin or prescribed by a physician.  Now, all OTC drugs can also be reimbursed from these accounts and arrangements.  With respect to the expansion of coverage for menstrual care products, this includes “a tampon, pad, liner, cup, sponge, or similar product used by individuals with respect to menstruation or other genital-tract secretions.”

  1. Temporary Tax-Free Reimbursement of Employees’ Student Loan Payments (Section 2206)

Between March 27, 2020 and January 1, 2021, an employer may reimburse an employee (or make payments directly to a lender) on a tax-free basis for qualified education loan repayments using an Educational Assistance Plan under Section 127 of the Internal Revenue Code (the “Code”).    Before an employer decides to reimburse employees for student loan payments, the employer should consider the following issues:

    • A qualified education loan is generally a loan that is obtained solely to pay for: (1) tuition and fees of a college, university, vocational school or other postsecondary educational institution; (2) room and board; and (3) books, supplies, transportation and miscellaneous expenses.

It is unclear how an employer will know that the reimbursement is for a qualified education loan. But borrowers are generally required to certify to lenders that the loan proceeds are being used to pay only for eligible expenses.  So, an employer may want to seek a similar certification (or request a copy of the certification to the lender) from the employee before it reimburses loan payments under an Educational Assistance Plan.

    • Generally, the only expenses that may be reimbursed under an Educational Assistance Plan are expenses incurred by the employee (i.e. not the employee’s spouse or dependent children).  However, a qualified education loan may be incurred by an individual for the individual, the individual’s spouse, or the individual’s dependent child.  It is unclear whether this allows loans incurred by an employee’s spouse or dependent child to be reimbursed under an Educational Assistance Plan.
    • Reimbursements for loan repayments, along with any other payments under the Educational Assistance Plan, are still subject to the calendar year limit of $5,250.
    • Since most student loan payments were suspended until September 30, 2020 due to the COVID-19 pandemic (voluntary payments are still permitted) and the limited duration of this arrangement, this may not be an attractive option to many employers, especially those with cash-flow constraints.

Educational Assistance Plans are generally not subject to ERISA.  However, they must be maintained using a written plan under Section 127 of the Code.  Employers who want to reimburse employees for student loan payments should amend their (or adopt an) Educational Assistance Plan to provide for these reimbursements.

  1. Alignment of Confidentiality of Substance Use Disorder Patient Records Regulations and HIPAA Privacy Rule Regulations (Section 3221)


Patient records of providers (that receive federal assistance) that contain substance use disorder information of the patient are subject to the Confidentiality of Substance Use Disorder Patient Records regulations (referred to as the “Part 2 Regulations”).  The Part 2 Regulations were issued by the Substance Abuse and Mental Health Services Administration (“SAMHSA”), an agency within HHS.  These regulations, in addition to the HIPAA privacy rule, impose restrictions on the use and disclosure of these patient records.

The Part 2 Regulations were originally issued in 1975 and have been periodically amended.  These regulations permit a provider to disclose patient identifying information, with written authorization of the patient, to third-party payers (e.g., group health plans).  However, the regulations did not permit the group health plan to disclose this information to third parties.  This restriction on re-disclosures presented challenges to group health plans, particularly self-funded group health plans that must disclose this information to its third-party administrator (“TPA”) to process and pay claims.  (Such disclosure is generally permissible under the HIPAA privacy rule, as long as there is a business associate agreement between the group health plan and TPA.)

SAMHSA amended the Part 2 Regulations in 2018, in part, to address this issue.  While many public commenters requested SAMHSA to align the Part 2 Regulations with the regulations issued under the HIPAA privacy rule, SAMHSA stated that it didn’t have the statutory authority to align the Part 2 Regulations with the HIPAA privacy rule regulations.

Under the amended Part 2 Regulations, group health plans are permitted to disclose patient identifying information to its TPA for payment and health care operations, as long as there is an agreement between the parties that requires the TPA to comply with the Part 2 Regulations with respect to that patient identifying information.  Group health plans and business associates have recently been updating their business associate agreements to add these contractual provisions.


In part, the CARES Act amends the statutory provisions related to the disclosure of patient records containing substance use disorder information and aligns those provisions with the HIPAA privacy rule.  As revised, with the written consent of the patient, these records may be used, disclosed, and re-disclosed for purposes of treatment, payment, and health care operations (as those terms are defined in the HIPAA privacy rule) by a covered entity (e.g., a group health plan) and a business associate (e.g., a TPA), as long as the use, disclosure or re-disclosure is permitted by the HIPAA privacy rule.

The CARES Act directs the SAMHSA to revise the Part 2 Regulations as necessary to comply with the changes made by the CARES Act.  Further, the changes made by the CARES Act apply to uses or disclosures that occur on or after March 27, 2021.  While it is not entirely clear, it appears that after March 26, 2021 an agreement that requires a TPA to comply with the Part 2 Regulations is no longer necessary for a group health plan to disclose information subject to the Part 2 Regulations to its TPA (as long as the TPA complies with the HIPAA privacy rule, including entering into a business associate agreement with the group health plan).


The CARES Act is a significant piece of federal legislation (880 pages) that quickly made its way through the legislative process.  We suspect that the CARES Act will be welcome relief to employers but also create a number of questions.  Hopefully, additional guidance is issued in the future to address these questions.  In the meantime, if you have any questions, please contact a Miller Jonson benefits attorney.