In-Depth: Legal loophole leads to allegations of price gouging for COVID-19 tests

COVID testing prices
Posted at 6:57 PM, Oct 01, 2021
and last updated 2021-10-01 21:57:06-04

SAN DIEGO (KGTV) -- Health experts say some companies are charging excessive rates for COVID-19 tests, all because of a loophole in federal law.

A provision in the CARES Act passed last year allows COVID testing companies to name any price they like and requires private health insurance companies to pay the full amount.

In lawsuits, health insurers say the practice has led to “price gouging” and “disaster profiteering” by some testing companies. Regulators say the inflated testing prices could eventually get passed to consumers through higher insurance premiums.

At a pharmacy, a rapid COVID test costs about $20. But a multi-state testing company called GS Labs lists its price at $380 for such a test.

In a survey earlier this year, the Kaiser Family Foundation found plenty of other examples.

“When we looked at the two largest hospitals and [Washington] D.C., we found that COVID-19 diagnostic test prices can range from $40 to $1,400,” said KFF health policy expert Krutika Amin.

As long as a COVID test is “medically necessary,” patients don’t have to pick up the bill.

The CARES Act requires insurance companies to cover the full cost of COVID testing, even if the individual does not have symptoms or a doctor’s referral, Amin said. There are other programs to cover testing costs for the uninsured.

Some providers might charge the patient up front, but consumers can submit the bill to insurance later for reimbursement, Amin said. There are only limited exceptions. Insurers are not responsible for covering return-to-work testing, so patients could be on the hook for that.

“In the interest of public health, Congress wanted to make sure that COVID-19 tests were available without any barriers to people, and so they required insurance to cover the full costs of COVID-19 test prices,” Amin said.

However, the federal government did not set limits on how much private insurance companies might have to pay for COVID testing, Amin said. That stands in contrast with how the government handled payments for COVID vaccines, where regulators set limits on what they consider reasonable charges.

Congress expected private health insurers and testing companies to negotiate rates for COVID tests in good faith. But lawmakers gave testing companies the ultimate trump card: in the event the two sides could not come to terms, insurance companies were responsible to pay whatever cash price the testing provider listed online.

That gives testing companies little incentive to negotiate, Amin said.

In a lawsuit, Blue Cross and Blue Shield of Kansas City accused testing provider GS Labs of refusing to negotiate and instead posting “sham cash prices” that were “excessive” and “objectively unreasonable.”

GS Labs says it is following the law. The company claims its prices are justified because of its level of customer service.
Ultimately, customers who get these tests are not paying these high prices now, but regulators warn that could change in the future.

“If these astronomical costs charged by unscrupulous providers are borne by the health plans and insurers without recompense, consumers will ultimately pay more for their health care as health insurance costs will rise,” wrote Justin McFarland, general counsel for the Kansas Insurance Department.

This week, a bipartisan group of lawmakers introduced a bill designed to curb surprise billing for COVID tests and address price gouging.

The bill would require the Department of Health and Human Services to survey testing companies and issue a public report “highlighting which providers are charging prices that substantially exceed the average cash price.”

Another bill proposed in July would cap the price of coronavirus tests at twice the reimbursement rate set by Medicare.