CMS Closes the Free COVID-19 Tests Coverage Loophole

Getting Republicans and Democrats to agree on anything these days is a Herculean task, even during a global pandemic. One of the rare points of consensus is with regard to the notion that all Americans should be able to get free COVID-19 testing. Accordingly, the mandate that payors pick up the full costs of testing without charging copayments was baked into the bipartisan relief legislation that Congress adopted in response to the crisis last spring. Of course, things didn’t exactly go according to plan. Aided by CMS guidelines, payors were able to exploit an enormous loophole in the coverage policy to avoid paying for a crucial aspect of COVID-19 testing: screening of the asymptomatic. But now CMS has closed that loophole. Here’s a briefing of the new developments and their impact on lab reimbursement.


On March 18, 2020, Congress enacted the Families First Coronavirus Response Act (FFCRA) requiring group health plans and health insurers offering group or individual health insurance coverage (but not short-term health plans) to provide benefits for certain items and services related to diagnostic testing for SARS-CoV-2. To ensure that testing is free, (Section 6001 of) FFCRA banned plans and insurers (which, for simplicity’s sake, we’ll refer to collectively as “payors”) from relying on standard methods of controlling costs and utilization, including:

  • Cost-sharing requirements like deductibles, copayments and coinsurance; and
  • Prior authorization and other medical utilization requirements.

Exactly one week later, FFCRA was amended via passage of the Coronavirus Aid, Relief, and Economic Security Act (CARES) which, among other things, broadened the range of diagnostic items and services subject to the Section 6001 coverage without cost-sharing or prior authorization mandate. CARES also required payors to reimburse providers of COVID-19 diagnostic testing an amount equal to their negotiated rate with the provider; if there was no negotiated rate, reimbursement had to be at the cash price for such service listed by the provider on a public website. CARES also gave payors the greenlight to negotiate for—but not unilaterally impose—a rate lower than the provider’s listed cash price.

The “Medically Appropriate” Loophole & CMS Guidance

But the free SARS-CoV-2 testing plan —at least as most labs and other providers perceived it—veered off in an unexpected direction. The problem stemmed from the seeds of a loophole embedded within Section 6001 in the form of qualifying language specifying that the ban on cost-sharing payment applies only to tests that a healthcare provider deems “medically appropriate.”

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On April 11, CMS issued guidance explaining how the private payor lab test reimbursement scheme would work. Tests subject to the Section 6001 no-cost-sharing-coverage rule, according to the guidance, include those ordered as a result of urgent care visits, emergency room visits and in-person and telehealth visits to a doctor’s office, according to the guidance. Tests performed on asymptomatic persons were conspicuously absent from this list.

Was that omission an oversight or a deliberate policy? The answer came on June 23 when CMS issued FAQs to explain the guidelines. In FAQ 5, CMS made it clear that it interpreted the “medically appropriate” language of Section 6001 as excluding “testing conducted to screen for general workplace health and safety (such as employee “return to work” programs, for public surveillance or any other purpose not primarily intended for individualized diagnosis or treatment of COVID-19.”

Sure enough, payors took the position that they didn’t have to cover—or at the very least, could charge cost-sharing amounts—for testing the asympomatic. Some insurers cited the “medically appropriate” language and CMS guidance to refuse paying for testing performed on pooled samples. (See, Diagnostic Testing and Emerging Technology (DTET), Sept. 3, 2020.)

The Loophole Closes

 The lab industry has argued that exploitation of the “medically appropriate” loophole to not cover COVID-19 screening undermines the FFCRA/CARES free testing policy and has repeatedly urged CMS to close it. Those pleas fell on deaf ears. But that all changed when the Biden administration took control.

On Feb. 26, 2021, CMS issued new guidance to make it clear that private payors generally can’t use medical screening criteria to deny coverage for COVID-19 testing for asymptomatic people with no known exposure to the virus. The test must be covered if a licensed or authorized healthcare provider administers or has referred a patient for the test regardless of whether a person has symptoms or has been exposed. Coverage must be offered without cost sharing, prior authorization, “or other medical management requirements imposed by the plan or issuer,” according to CMS. However, the guidance continues, payors may but aren’t required “to provide coverage of testing such as for public health surveillance or employment purposes.”

The new CMS guidance also confirms that insurers must cover point-of-care COVID-19 tests and diagnostic tests administered at state or local sites. This reinforces the existing policy that allows providers to seek federal reimbursement for providing COVID-19 diagnostic testing or vaccines to people who are uninsured. Providers can get reimbursed for COVID-19 diagnostic testing and vaccine administration through the Health Resources and Services Administration COVID-19 Uninsured Program, part of the Provider Relief Fund.

According to CMS, the new guidance should also make it easier for people to access COVID-19 diagnostic testing. For instance, the agency said people can get tested for COVID-19 before visiting a family member and pay no additional out-of-pocket costs. It reaffirms that payors are prohibited from requiring prior authorization or other medical management for COVID-19 diagnostic testing.”


Industry reaction to the coverage clarification provided by the new guidance was swift and highly positive. For example, the American Clinical Laboratory Association praised CMS for taking “critical steps to close coverage gaps and protect access to the COVID-19 testing patients need.”