Blue Cross Blue Shield Sues National Lab for COVID-19 Test Price Gouging

The clash between labs and private insurers over reimbursement for COVID-19 testing is getting louder and uglier by the moment. Labs have accused insurers of evading the Families First Coronavirus Relief Act (FFCRA) mandate to cover COVID-19 tests without cost sharing, particularly with regard to rapid tests for the asymptomatic. But now insurers are taking the offensive by suing labs for COVID-19 test price gouging. One of the central battlefields in the ongoing conflict are the recent lawsuits by Blue Cross and Shield insurers against GS Labs, a leading provider of COVID-19 rapid tests in 13 states and 27 locations nationwide.

Price Gouging & the CARES Act Loophole

On March 27, 2020, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act, in part to implement the FFCRA free COVID-19 test mandate. The CARES Act requires insurers to pay out-of-network labs whatever “cash price” they list online for COVID-19 tests without imposing any limits on those prices. The expectation was that private health insurers and testing companies would negotiate COVID-19 test reimbursement rates in good faith. However, the law also provides that insurance companies were responsible to pay whatever cash price the testing provider lists online, in the event the two sides couldn’t agree on terms, a provision that effectively eliminated the incentive of test labs to negotiate.

Health insurers claim that out-of-network labs have been taking advantage by charging extra high rates for desperately needed COVID-19 tests. Last summer, the industry trade association America’s Health Insurance Plans (AHIP) published a “study” based on a survey of 22 members finding that the share of testing conducted at out-of-network facilities rose from 21 percent to 27 percent between April 2020 and March 2021. It found that out-of-network labs were charging an average of $185 per rapid test, as opposed to the $130 in-network labs were charging for both rapid and more costly molecular PCR tests. About half of out-of-network providers are charging at least $50 more than that.

The Price Gouging Lawsuits against GS Labs

Recently, insurers have taken their price gouging claims to court, making Omaha, Nebraska-based GS Labs the primary target. GS Labs, which posts all test prices on its website, has allegedly been routinely billing insurance companies $380 for out-of-network COVID-19 rapid tests testing, more than three times the average billed by in-network labs.

In July 2021, Blue Cross Blue Shield Kansas City sued GS Labs for attempting to profit from the public health crisis. The suit claims the lab upcharged BCBS Kansas City $9.2 million for COVID-19 tests. GS Labs responded by countersuing BCBS Kansas City for “legal bullying” by filing a surprise lawsuit intended to stiff the company out of paying for some 34,600 member claims. The case is pending. BCBS Kansas City is seeking a ruling that would void $10.9 million in outstanding claims. In court last month, the insurer claimed that the fees were “disaster profiteering” and in violation of public policy.

In October, another Blue Cross and Blue Shield insurer sued GS Labs for price gouging on COVID-19 tests. Premera Blue Cross is claiming that GS Labs imposed $26 million in upcharges and is asking the US District Court for the Western District of Washington for a declaratory judgment, i.e., a ruling declaring that the insurer doesn’t have to pay 80,000 claims for out-of-network COVID-19 tests performed by GS Labs.

According to the Premera complaint, GS Labs charges about 10 times what Medicare reimburses clinicians for administering a COVID-19 antigen test, and twice as much for administering more advanced PCR tests. Premera’s attorneys presented the following table comparing GS Labs’ test prices to Medicare reimbursement rates.

COVID-19 Test Rates: GS Labs v. Medicare

Source: Premera attorneys accusing GS Labs of price gouging in federal court

Premera also alleges that GS Labs performs multiple, unnecessary tests on a single individual as a means to submit as many claims as possible to insurers.

For its part, GS Labs has vigorously denied the claims, which it contends are a deliberate attempt by the BCBS insurers to skirt their obligation to reimburse for the COVID-19 tests in question. The lab insists that it’s following the law and claims that the high prices are justified because of its level of customer service.

However, this isn’t the first time GS Labs’ pricing has come under scrutiny. In December, the Kansas Insurance Department began investigating a GS Labs facility that was charging $1,000 for tests, which the state’s general counsel said was higher-than-average. In addition, Gabriel Sullivan, part owner of GS Labs, faces an ongoing suit from a previous health care employer that accuses him of inappropriately billing insurers.

Takeaway

While the optics are certainly ugly, the legal case against GS Labs is anything but certain. Even if the insurers can substantiate their claims about the prices the lab is charging, it may not be enough to find it in violation of the CARES Act, due to the way the “cash pricing” language is written. After all, those prices may be legally valid if those are the prices GS Labs posts on its website.

It’s also worth noting that for all of the insurance industry’s hollering over out-of-network COVID-19 lab test price gouging, GS Labs is currently the only one facing actual litigation. In addition, at least one major health insurer, UnitedHealth Group has been sued by labs for failure to pay claims for COVID-19 tests. (See, Laboratory Industry Report, July 1, 2021).