Labs and Payors Take Their COVID-19 Test Reimbursement Feud to Court

The very public feud between health insurers and labs over payment of COVID-19 tests has just entered a new stage: litigation.

FFCRA, CARES & the Free Test Mandate 

On March 18, 2020, at the start of the public health emergency, 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 deductibles, copayments and coinsurance, prior authorization and other standard methods used by payors to control utilization and costs.

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 “medically appropriate” 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 PR War Over COVID-19 Test Reimbursement

From the very onset, labs and payors have clashed over the extent of the free testing mandate. Testing labs have repeatedly accused insurers of failing to provide reimbursement for COVID-19 tests in defiance of the federal mandate. Health insurance groups have responded by accusing labs of price gouging.

Insurers escalated the PR war last November in the form of a study supposedly documenting overcharging of labs for COVID-19 tests. The study from America’s Health Insurance Plans (AHIP) based on data from survey of 22 members, representing 76 percent of commercial enrollment of the trade group’s member plans, found that, on average, a test in the commercial market costs $130, and out-of-network tests cost more than $185. Its conclusion: “Between 9 percent and 16 percent of out-of-network test claims charged more than $390 (three times the average cost).”

The Genesis Lawsuit against UnitedHealth

A new front in the conflict opened on June 2 when medical testing lab Genesis Laboratory Management sued UnitedHealth Group in the U.S District Court for the district of New Jersey. UnitedHealth paid the majority of the out-of-network molecular diagnostic and anatomic pathology lab’s claims for March, April and May 2020. However, the suit contends, United and its Oxford Health Plans Group began “systematically denying” payment for claims starting in June, even though the lab didn’t change its testing, billing or documentation practices. Genesis contends that it has never refused to treat United members despite the insurer’s failure to pay and despite its demands that the lab “produce voluminous patient treatment and other records with tight response time demand.”

In addition to FFCRA and CARES, Genesis claims that United violated a pair of New Jersey state laws, including the:

  • Healthcare Information Networks and Technologies Act; and
  • Health Claims Authorization, Processing and Payment Act. 

The complaint also accuses UnitedHealthCare with breach of implied contract, breach of the covenant of good faith and fair dealing and unjust enrichment, among other things. “Genesis has been, and continues to be, harmed by United’s failure to pay valid claims that Genesis submitted to United for reimbursement for services to United’s members and beneficiaries,” the complaint states.

Blue Cross and Blue Shield Sues Lab for Price Gouging

Insurers have now resorted to the litigation card. Blue Cross and Blue Shield of Kansas City is suing GS Labs for COVID-19 test price gouging, contending that the national testing facility inflated its cash prices and performed medically unnecessary tests on out-of-network members.

The $9.2 million federal lawsuit accuses GS Labs of “engaging in an abusive scheme to exploit the COVID-19 pandemic by duping health insurers into paying thousands of COVID-19 diagnostic testing claims at grossly inflated rates.” BCBS claims that GS Labs charged it $380 for a COVID-19 antigen test, roughly 10 times what Medicare reimburses for the test and up to $979 for a PCR test.

This is not the first time that GS Labs’ test prices have come under question. Last December, the Kansas Insurance Department began investigating a local facility owned by GS Labs for charging $1,000 for tests. GS Labs has yet to comment on these allegations.


So far, the battle over reimbursement of COVID-19 testing has focused on testing of the symptomatic. Seizing on a loophole in the CMS guidance defining “medically appropriate” tests covered by CARES as applying to the symptomatic, health insurers have refused to pay for rapid tests performed on asymptomatic persons by employers, schools and other institutions for purposes of screening.


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