Labs are charging up to $14,000 for COVID-19 tests. Insurers claim 'price gouging.'

·8 min read

Jonathan McHale’s son took two coronavirus tests within 10 days at a pharmacy in Arlington, Virginia, and McHale was astonished at the price.

The total bill – $1,728, or $864 for each test.

Had he known he’d be charged that amount for the tests, McHale would’ve urged his son to go elsewhere.

“The lack of information and ability to make informed choices is so screwed up,” McHale said. “They’ve got a license to go hog wild.”

When Congress passed emergency legislation last year to get people quick and free access to COVID-19 tests amid a nationwide shortage, lawmakers mandated key stipulations. Health insurance companies had to cover the test with no financial obligation to consumers and pay the list price for labs outside the insurers' networks.

But some insurers and cost-conscious consumers are fighting what they consider high-priced tests from labs that charge 10 times or more than Medicare’s rate of $51 per test. The insurers allege in lawsuits that some labs are profiteering in the midst of a pandemic, but labs contend insurers are withholding payments for legitimate services desperately needed to protect patients and help public health track the virus.

Labs that have no negotiated rates with health insurers can set a cash price that insurers are required to pay under the federal Coronavirus Aid, Relief, and Economic Security Act, said Ge Bai, a Johns Hopkins University professor of accounting and health policy and management.

Bai’s study published in the Journal of General Internal Medicine found widespread variation on coronavirus test prices. The prices ranged from 1 cent to $14,750 for a test to detect whether a person is infected.

“What we see is not really surprising," Bai said. "It’s inevitable.”

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Bai’s study, which analyzed more than 182,000 claims for COVID-19 diagnostic tests from more than 2,300 providers, also found average costs varied significantly among states. Utah’s tests were cheapest at $65. Washington, D.C., labs charged the most, at $506 per test.

McHale’s son last September went to Preston’s Pharmacy in Arlington, just outside Washington, D.C. The pharmacy staff took a nasal swab specimen and sent it to a Pennsylvania lab, Principle Diagnostics, to complete the test. The lab billed McHale’s insurance company $864 for each test.

McHale called a pharmacy representative for an explanation and sent a letter this month to Principle. In the letter, McHale said the lab “had no rational basis” to charge $864 per test.

A Blue Cross Blue Shield health insurance plan for federal employees sent McHale a check for the tests. He has not forwarded the full payment and instead sent a check for $299 to the lab – about twice the amount Medicare pays for collecting specimens and performing COVID-19 tests. He hasn't yet heard whether the lab will accept his partial payment.

A Preston's Pharmacy representative referred questions about pricing to Principle. A lab representative did not return a call from USA TODAY.

A website lists Principle’s current COVID-19 test price at $195 – about four times less the amount McHale and his insurer were billed a year ago.

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Insurers claim 'price gouging'

Because there wasn’t enough testing to keep pace with the virus in the early months of the pandemic, Congress wanted to remove barriers to ensure people had access to adequate testing. Hospitals, labs, doctors and tech firms spent millions to purchase equipment, acquire sites and hire health workers to administer tests.

Insurers acknowledge such measures were needed to ramp up testing during a public health emergency. But as the coronavirus pandemic drags on, health insurers want Congress and government regulators scrutinize the amount charged by out-of-network labs.

A survey by America's Health Insurance Plans, an industry group representing health insurers, claims out-of-network labs through March billed 54% more than the average $130 charged by private labs. About 7% of labs charged $390 or more for a test.

Jeanette Thornton, AHIP's senior vice president of product, employer, and commercial policy, said the vast majority of labs and testing providers contract with insurers and agree to accept negotiated rates. But AHIP urges Congress to establish a "reasonable" market-based price benchmark for out-of-network tests.

AHIP also said policymakers should make rapid antigen-tests, which tend to be less expensive than lab-based PCR tests, more widely available.

"Even a year into the pandemic, we’re seeing really high instances of what we call price gouging," Thornton said.

Although fewer labs are charging the highest amounts, the share of tests performed by out-of-network labs is growing. About 21% of tests were completed by labs outside insurers' networks during the first three months of the pandemic. From January through March, out-of-network labs handled a larger share with 27% of tests, according to AHIP.

And although fewer Americans got tested this spring when COVID-19 cases and hospitalizations plummeted, cases and testing have surged as the highly contagious delta variant became the dominant coronavirus strain.

Testing could further accelerate under the Biden administration's plan to require businesses with 100 or more employees to mandate vaccinations or require weekly testing.

Without implementing benchmark pricing, insurers worry some non-network labs will continue to charge hundreds of dollars for COVID-19 tests.

"Some providers have just taken advantage of the public health emergency and also have taken advantage of the language in the law that requires us to pay the cash price," Thornton said. "Unfortunately, I think that has opened the door to more egregious, price-gouging practices."

Lab charges $380 per test, insurer sues

Some insurers are scrutinizing claims, delaying payments or suing labs that bill above average rates.

In July, Blue Cross and Blue Shield of Kansas City filed a federal lawsuit alleging GS Labs LLC is seeking to "exploit the COVID-19 pandemic by duping health insurers into paying thousands of COVID-19 diagnostic testing claims at grossly inflated rates."

Blue Cross Blue Shield of Kansas City said GS Labs demanded payments equal to about 10 times the amount other testing providers agreed to accept. GS Labs charged $380 for rapid tests that can be purchased at wholesale for under $20 and for which other testing providers charge as little as $35, the lawsuit said.

But GS Labs countersued Blue Cross Blue Shield of Kansas City and claimed the insurers is "boldly attempting to use the legal system to bully a COVID-19 testing company."

The lab said the insurer's lawsuit is a “baseless attempt to stiff” a company it owes $9.6 million for more than 34,000 tests.

The testing company began as a small medical clinic in Omaha, Nebraska, that obtained federal certification to open a lab. When the nation experienced a shortage of testing sites last year, the company closed the medical clinic and focused exclusively on testing to meet the nation's shortage, said Kirk Thompson, a partner with GS Labs.

The owners invested $37 million to open more than two dozen locations nationwide, hired nearly 3,000 workers and staffed a round-the-clock hotline for customers.

Thompson said the price of $380 per test is fair because there’s “nobody who has a premium service that we do.”

Thompson said other payers, including other Blue Cross Blue Shield insurers, have paid the lab’s price without qualms.

“To think that our pricing is outrageous is just not factual,” Thompson said.

When the lab company set the price for its testing, it was uncertain how long the public health emergency would last and wanted to set a price so it could recoup its investment, said David Leibowitz, a GS Labs spokesman.

GS Labs closed some sites amid the testing slump earlier this year, and "we were ready to wrap this up," Thompson said. But with with the delta variant driving new cases and testing demand, the company began reopening sites. It now has 16 testing sites, including Kansas City, and plans to open two more locations.

"Testing is more important than ever," Thompson said.

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Doctors and health insurers have clashed in other states, too.

Murphy Medical Associates, a medical practice in Greenwich, Connecticut, filed a lawsuit claiming the health insurer Cigna owed the medical provider more than $6 million for uncompensated coronavirus tests. Cigna filed a motion to dismiss the lawsuit, and attorneys for Murphy opposed the motion.

Dr. Steven Murphy referred questions about the lawsuit to his attorney, John Martin, who declined to discuss the pending case. Cigna officials did not answer questions about the lawsuit.

Bai, of Johns Hopkins, said insurers will continue to protest the cost of coronavirus tests, but she said insurers don't have leverage under the CARES Act to steer customers to lower-priced, in-network testing providers.

Even though the federal law shields people from out-of-pocket costs for coronavirus testing, she said insurers will pass the cost to employers and consumers.

"Eventually, the money will come from individual patients in higher premiums," she said.

Ken Alltucker is on Twitter as @kalltucker or can be emailed at alltuck@usatoday.com.

This article originally appeared on USA TODAY: COVID tests: Insurers fight expensive lab tests, claim 'price gouging'

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