Are COVID-19 Test Providers Profi teering From the Pandemic?

BY ARLENE WEINTRAUB

On Oct. 14, Premera Blue Cross, based in suburban Seattle, sued GS Labs alleging that the Omaha, Neb.–based medical testing company is exploiting the COVID-19 pandemic by overcharging for COVID-19 testing. It was the second Blue Cross plan to file suit against GS Labs over its COVID-19 test prices in six months.

Premera alleged that GS charges prices ranging from $380 to $979 per test, which often amounts to 10 times more than what other labs are charging. Virtually every claim from GS indicates that patients have reported COVID-19 symptoms or exposures, Premera said in its complaint. “But GS Labs does not perform individual patient assessments, and includes these false diagnoses in an effort to obtain higher payments,” the lawsuit alleged.

Insurers are far from alone in their complaints about COVID-19 test pricing. Some consumers have faced unexpected out-of-pocket charges, despite the fact that two federal laws passed at the start of the pandemic—the Coronavirus Aid, Relief, and Economic Security (CARES) Act and Families First Coronavirus Response Act (FFCRA)—mandated free testing for insured patients and provided reimbursement mechanisms for the uninsured.

“A crisis can become a profiteering opportunity, and some providers may be attempting to take advantage of the pandemic,” said Ge Bai, PhD, a professor of accounting, health policy and management at the Johns Hopkins University, in Baltimore.

Premera’s suit alleges that GS Labs has improperly filed claims for more than $26 million worth of COVID-19 tests. Blue Cross and Blue Shield of Kansas City, which filed a lawsuit against GS Labs in July, alleged that the lab provider billed $9.2 million in improper charges for COVID-19 testing.

GS countersued the Kansas City insurer, demanding the entire $9 million owed plus damages, interest and legal fees. Under the CARES Act, insurance companies are responsible for paying for COVID-19 tests, the company said. “This is a perfect example of Big Insurance trying to make things absurdly complicated to avoid paying what they owe,” said GS Labs partner Kirk Thompson in a statement. The company calls the allegations in the Premera suit “patently false” and “a blatant attempt to disregard the CARES Act and the intentions of Congress.”

On Oct. 29, GS filed suit against Medica, a health insurer in Minnesota, alleging failure to pay $10 million in COVID-19 testing charges.

Under the two federal laws passed at the start of the pandemic, insurers have to pay the full list prices for COVID-19 testing and related services. They can negotiate those prices with providers that are in network but not with those that are out of network, the latter of which can become onerous for payors, said Loren Adler, the associate director of the University of Southern California-Brookings Schaeffer Initiative for Health Policy.

“For out-of-network tests, insurers have to pay any ‘cash price’ that a lab or hospital lists on its website, without any restrictions,” Mr. Adler said. Medicare pays $50 for a standard

COVID-19 polymerase chain reaction test, but most hospitals and labs are charging much more than that, he added.

The Kaiser Family Foundation (KFF) searched COVID-19 test prices for 102 hospitals in 50 states in early 2021 and found 203 different prices ranging from $20 to $1,419 per test. Nearly half of hospitals charged between $100 and $199, KFF found.

Hospitals that administer COVID-19 tests also can bill for specimen collection and office visits. Only 30 of the hospitals that KFF sampled posted those charges, which ranged from $18 to $240, the foundation reported.

Further complicating the debate over COVID-19 test prices are loopholes in the CARES Act and FFCRA that some COVID19 test providers can leverage, said Cynthia Cox, a vice president at KFF and the director of the Peterson-KFF Health System Tracker. For example, insurers can deny claims or impose cost sharing on people who are tested for COVID-19 but have not experienced symptoms or had known exposures to the virus.

The feds released guidance early this year stating that insurers must fully cover testing of asymptomatic people, but there are still some notable exceptions, Ms. Cox said. “There are starting to be more situations where COVID-19 testing is required by schools, employers or for travel,” she said. “For this routine screening, insurers can say, ‘Sorry, that’s not medically necessary, so we’re not going to pay for any of it, or we’re only going to pay part of it.’”

Such refusals to pay for testing could increase as prices continue to rise. AHIP (America’s Health Insurance Plans), a national association of health insurers, surveyed members over the summer to find out what they’re being charged for COVID-19 testing and concluded in a report that price gouging “continues as a significant problem.” The survey found that in-network providers were charging $130 on average for COVID-19 tests.

More than half of out-of-network providers charged $185 or more per test in March 2021, which was about 12% more than they charged a year before, AHIP reported. The share of tests that cost 50% or more than the average commercial price has doubled to 36% since the start of the pandemic, according to the study.

The share of “egregiously priced COVID tests,” those costing $390 or more, fell from 12% in spring 2020 to 7% at the start of this year, likely reflecting the fact that the share of tests performed at health clinics—many of which would be charging negotiated in-network prices—has increased, AHIP said.

Up to Lawmakers

Still, AHIP called on lawmakers to stem COVID-19 test overcharges. “COVID-19 testing price gouging threatens the progress we are making against this deadly virus, and we urge the administration, Congress and policymakers to take deliberate steps to ensure testing is accessible and affordable for all Americans,” said Jeanette Thornton, a senior vice president at AHIP, in a statement.

Johns Hopkins public health researchers wondered whether there is a correlation between surging demand for COVID19 testing and an increase in test prices. So, they examined more than 182,000 insurance claims filed by 2,324 providers between March and July 2020. They found no correlation between state-level testing rates and charges. (J Gen Intern Med 2020 Sep 15. doi:10.1007/s11606-020-06198-y).

But they found a “huge variation” in charges depending on the type of facility where the testing occurred and the state where it was based, Dr. Bai said. For example, independent laboratories charged on average $140.41 for a COVID-19 diagnostic test, while hospital outpatient clinics charged $168.87 on average. The average price on the state level for diagnostic testing ranged from a low of $64.98 in Utah to a high of $505.65 in Washington, D.C.

The limited negotiating power granted to insurers likely fueled those differences, Dr. Bai said. “Some providers charged high amounts because they could,” she said.

The insurance industry continues to push lawmakers to find solutions to COVID-19 test price gouging. The Blue Cross Blue Shield Association (BCBSA) asked policymakers to allow the Centers for Medicare & Medicaid Services to establish a “fair price” for COVID-19 testing, a spokesperson said in an email. That would move “away from posted cash prices for out-of-network facilities, which often have little bearing on the actual costs of the test or their administration,” BCBSA said.

So far, there have been few reports of high COVID-19 test prices being passed along directly to consumers, but that could change as more asymptomatic people seek testing. Some employers are mandating regular testing for employees who refuse to get vaccinated, for example. “Once employers impose these kinds of requirements, employees are exposed to the risk of high COVID-19 test prices,” Dr. Bai said.

Additional protection for consumers is coming in 2022 with the enactment of the No Surprises Act, a federal law that will make it illegal to pass surprise out-of-network bills along to patients. Under the law, any patient who unknowingly receives out-of-network care will not be responsible for cost sharing beyond their in-network rate. So, if an in-network hospital performs a COVID-19 test that’s sent to an out-of-network lab for processing, insurers will only be able to impose cost sharing on patients at their contracted in-network rates.

Even with those consumer protections, high COVID-19 test pricing could ultimately have a negative long-term impact on health care costs, Mr. Adler said, because insurers will likely pass the costs along to patients by hiking premiums, or in the case of employer-sponsored health plans, slashing wages. “If insurers pay more for these tests, those costs will ultimately be borne by consumers and patients,” he said. ■

Mr. Adler, Dr. Bai and Ms. Cox reported no relevant financial disclosures.