When people receive COVID-19 testing at an out-of-network facility, federal law requires insurers to pay that clinical laboratory’s posted ‘cash price’ when negotiated prices have not previously been established
In the latest example that some COVID-19 testing companies are charging significantly higher prices than others, The New York Times (NYT) recently reported that one COVID lab company with “more than a dozen testing sites” throughout the US was charging $380 for a COVID-19 rapid test that can be purchased at many drug stores for $20. Sadly, this practice, the NYT also noted, is protected by federal law.
Media reporters and the lay public are not fully aware of the long-established clinical laboratory test payment modalities that govern the daily performance of tests ordered as part of regular healthcare. Thus, when the COVID-19 pandemic hit—along with tens of billions of federal dollars to pay for SARS-CoV-2 tests—it triggered a gold rush of people wanting to get into the clinical laboratory testing business specifically to make money.
It is the bad actors in this group who are tainting the entire clinical laboratory industry with often outrageous business practices that, at best, cross ethical lines—such as overpricing tests to consumers—and at worst, represent fraudulent behavior, such as inducing medically-unnecessary tests, then submitting claims for these tests.
Even as the pandemic appears to be waning, news outlets are reporting instances of insurers being charged higher “cash prices” for tests performed by out-of-network testing laboratories. Worse yet, federal law requires insurers to pay these exorbitant prices and they are not happy about it.
In-Network versus Out-of-Network Pricing
In its report, the NYT noted that the CARES Act (H.R. 748) requires insurers to pay whatever “cash prices” out-of-network labs post online, and that this is leading to “expensive coronavirus tests” that could ultimately be reflected in future “higher insurance premiums” charged to healthcare consumers.
One company the NYT highlighted in its report is GS Labs in Omaha, Neb., a provider of COVID-19 testing throughout the US. The testing company’s COVID-19 Pricing Transparency webpage lists these prices for the following COVID-19 tests:
- Rapid Antigen Test—$380.
- Rapid Antibody Test—$380.
- PCR Test—$385.
- BioFire Respiratory Panel PCR—$979
- ePlex Respiratory Panel PCR—$979
- Small Respiratory Panel—$499.
“Insurers are obligated to pay cash price, unless we come to a negotiated rate,” Christopher Erickson, a GS Labs Partner, told the NYT.
Negotiate or ‘Pay the Provider’s Cash Price’
In Missouri, Blue Cross and Blue Shield of Kansas City (Blue KC) has filed a lawsuit against GS Labs. “This action seeks a judgment declaring Blue KC and our members are not required to pay GS Labs’ unreasonable, inflated reimbursement demands,” according to a Blue KC news release.
However, section 3202 of the Coronavirus Aid, Relief, and Economic Security (CARES) Act “specifies the process for private health insurance plan issuers to reimburse providers of COVID-19 diagnostic tests. Specifically, a reimbursement rate negotiated for such test prior to the public health emergency declared on January 31, 2020, continues to apply for the duration of the emergency. If a reimbursement rate was not negotiated prior to the emergency declaration, an issuer may either negotiate such rate or pay the provider’s cash price.”
In its own news release, GS Labs said it has “countersued Blue KC over the insurance company’s failure to pay $9.7 million for COVID tests covered by federal law.”
According to a legal expert who spoke with the NYT, GS Labs has grounds for its test charges due to the CARES Act. “Whatever price the lab puts on their public facing website, that is what has to be paid. I don’t read a whole lot of wiggle room in it,” said Sabrina Corlette, JD, Research Professor and Co-Director of the Center on Health Insurance Reforms at Georgetown University.
The law is aimed, partially, at “guaranteeing out-of-network testing entities receive payment,” wrote Loren Adler, Associate Director of the USC-Brookings Schaeffer Initiative for Health Policy, in a blog post, titled, “How the CARES Act Affects COVID-19 Test Pricing.”
The blog post, the Brookings editors noted, “is part of the USC-Brookings Schaeffer Initiative for Health Policy, which is a partnership between Economic Studies at Brookings and the University of Southern California Schaeffer Center for Health Policy and Economics.”
“Unfortunately,” noted Loren Adler (above), Associate Director of the USC-Brookings Schaeffer Initiative for Health Policy, in a blog post, “this ‘cash price’ is not a market-determined price—it is irrelevant to patients because all options have to be made free to them by law, so there is little constraint on how high this is set by testing entities. Nor is there any reason for out-of-network entities to accept any less than this amount (other than a desire to contract in the future with the insurer for fear of a public relations backlash). Moreover, in theory the patient can still be surprise balance billed if the provider’s charge is higher than this ‘cash price,’ though it is unclear why any provider would list a ‘cash price’ lower than their charge.” (Photo copyright: The Brookings Institution.)
In his analysis, Adler suggested the law be revised to require commercial insurers to pay for COVID-19 testing at Medicare prices.
Patient Receives a $54,000 ‘Surprise’ Bill for COVID-19 Out-of-Network Test
Meanwhile, in Texas, a consumer was billed $54,000 for a COVID-19 PCR (polymerase chain reaction) test, an antigen test, and ER facility fee by a SignatureCare Emergency Center in Lewisville, Texas, according to a Kaiser Health News (KHN) Bill of the Month report, titled, “A COVID Test Costing More Than a Tesla? It Happened in Texas.”
The patient, Travis Warner, reportedly has insurance from Molina Healthcare through the federal Health Insurance Marketplace. After an employee at his company tested positive for COVID-19, Warner drove 30 miles outside of Dallas in search of COVID-19 testing sites. He eventually visiting an out-of-network free-standing emergency room in Lewisville where he received PCR diagnostic and rapid antigen tests. The results of the tests were negative for COVID-19. But the bill was a shock.
The total bill came to $56,384. Molina Healthcare paid its negotiated rate of $16,915.20 for the testing and facility fee, leaving Warner responsible for the remaining $54,000!
In the end, Warner did not have to pay the bill. Molina resolved the charge with SignatureCare and, in a statement to KHN, wrote, “This matter was a provider billing error, which Molina identified and corrected.”
For its part, SignatureCare Emergency Centers, with freestanding centers throughout Texas, said it has a “robust audit process” to flag errors and processed “thousands of records a day” at the height of the pandemic, according to KHN, which reported the business showing a $175 price for a COVID-19 test on its website.
“If the insurance company is paying astronomical sums of money for your care, that means in turn that you are going to be paying higher (insurance) premiums,” Adler told KHN.
Insurance Group Finds Price Gouging
“Price gouging on COVID-19 tests by certain providers continues to be a widespread problem,” according to a statement by America’s Health Insurance Plans (AHIP), a national association representing insurers.
AHIP has studied COVID-19 test prices since April 2020. It released a survey earlier this year which found COVID-19 test prices were on average $130. However, AHIP also found that out-of-network providers charged “significantly higher” (more than $185) for more than half (54%) of COVID-19 tests (PCR, antigen, antibody) in March 2021—a 12% increase since 2020. More than 27% of COVID-19 tests in March 2021 were done out-of-network, a 6% increase since 2020.
However, in, “COVID-19 Lab Test Prices Give Some Health Plans ‘Indigestion’,” Dark Daily’s sister publication, The Dark Report, wrote, “Interestingly, [AHIP] researchers reported that the share of COVID-19 tests claims submitted from ‘high-cost locations’—identified as hospitals and emergency departments—declined from 18% in the first three months of the pandemic to only 5% during the first three months of 2021.”
Niall Brennan, President and CEO of the Health Care Cost Institute (HCCI), told KHN, “People are going to charge what they think they can get away with. Even a perfectly well-intentioned provision like [the CARES Act] can be hijacked by certain unscrupulous providers for nefarious purposes.”
Of course, most medical laboratories priced their tests fairly and have performed them in an efficient and professional manner during the pandemic. So, it is unfortunate to learn through AHIP’s survey findings and the media that some COVID-19 testing providers are posting prices that may confuse patients and affect their health insurance premiums.
—Donna Marie Pocius
Related Information:
This Lab Charges $380 for a COVID Test. Is That What Congress Had in Mind?
GS Labs Countersues, Fires Back at Blue KC over $9.7 Million Payment Failure
How the CARES Act Affects COVID-19 Test Pricing
A COVID Test Costing More than a Tesla? It Happened in Texas
New Data Shows Continued Evidence of COVID-19 Testing Price Gouging
COVID-19 Lab Test Prices Give Some Health Plans ‘Indigestion’
