At least one laboratory is charging up to $380 for a rapid Covid-19 test—a price that insurers characterize as "price-gouging," and the laboratories say are appropriate and supported by public policy, Sarah Kliff reports in New York Times' "The Upshot."

The CFO’s guide to navigating federal funding sources of Covid-19 relief

A $380 rapid Covid-19 test

A rapid Covid-19 test from a drugstore typically costs less than $20, Kliff writes. But GS Labs, which runs over a dozen testing sites across the United States, routinely charges $380 for such tests. The company has performed half a million rapid tests since the start of the pandemic and continues to run thousands of tests each day.

Radio Advisory episode: Who's making money in 2021? A look at hospitals and health plans after Covid-19.

Under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, insurers are required to pay out-of-network laboratories, such as GS Labs, the "cash price" they list online for their testing services—no matter how much that might be, Kliff reports.

And, like GS Labs, other out-of-network laboratories may also be charging high prices for Covid-19 tests, Kliff reports. A study from America's Health Insurance Plans found that the proportion of Covid-19 tests conducted at out-of-network facilities increased from 21% to 27% between April 2020 and March 2021.

In addition, the study found that around half of out-of-network laboratories charged at least $50 more for Covid-19 tests than the average in-network cost of $130.

According to several health insurers, these high prices may negatively affect patients by leading to higher insurance premiums.

Insurers push back against high prices for testing

Many health insurers have pushed back against GS Labs' Covid-19 testing fees, Kliff reports, and some have accused the company of "price-gouging" and "disaster profiteering" during a public health crisis.

For example, UPMC Health Plan in Pittsburgh claimed GS Lab tried to drive up the cost of its Covid-19 testing services by billing both a rapid antigen test and an antibody test. According to the health plan, 91% of the claims it received using this combination billing came from GS Labs.

"There is very little reason to order both of those tests on the same day," Stephen Perkins, UPMC Health Plan's CMO, said. "They serve very different purposes, and they would not be systematically ordered as a result of suspected Covid exposure." But insurers are required to fully cover both antigen and antibody tests, Kliff reports. "The CARES Act governs what we can and can't do, and we can't refuse to pay for the double billing," Perkins said.

In addition, UPMC Health Plan and Blue Cross Blue Shield Kansas City have argued GS Labs' true cash price for its Covid-19 test is much lower than the $380 advertised on its website.

At one point, GS Labs offered a 70% discount to patients who paid for the test on their own, bringing the price down to $114, Kliff reports. Although the discount has now been removed from the company's website, both insurers claim the lower price is the actual cash price of the company's testing services, and Blue Cross Blue Shield Kansas City filed a lawsuit arguing this assertion.

"GS Labs knowingly and willfully executed a scheme or artifice to defraud health insurers and plans by posting a sham cash price and then demanding that group health plans and insurers pay those same sham cash prices," the health plan wrote in a legal brief.

GS Labs defends its Covid-19 test pricing

In response to the lawsuit, GS Labs said insurers are not "entitled to pay only a small fraction of the published cash price" just because discounts were offered to some patients. Currently, the company has countersued Blue Cross Blue Shield Kansas City, saying the plan is required to pay nearly $10 million for 34,621 outstanding claims.

"We're very reasonable people, but our cash price is a true cash price for any insurer that does not want to negotiate," Kirk Thompson, a partner at GS Labs, said.

According to legal documents, GS Labs pays "approximately $20" for a rapid Covid-19 test itself, Kliff reports. Christopher Erickson, a partner at GS Labs, said the remainder of the tests' cost is due to the "premium service" the company offers patients, as well as $37 million in start-up costs associated with building its network of laboratories over the last year.

"You can book 15 minutes out with us on any given day, and get your results in 15 to 20 minutes," Erickson said. "We have a nursing hotline where you can get your results interpreted. Our pricing is one of the most expensive in the nation because we have the best service in the nation."

Separately, health policy experts who reviewed GS Labs' prices said it is difficult to understand why the company's Covid-19 tests cost eight times the Medicare rate of $41, even taking into account the company's investment into its services, Kliff reports.

"This is not like neurosurgery where you might want to pay a premium for someone to have years of experience," Sabrina Corlette, a research professor at Georgetown University, said.

However, Corlette and other experts said the company had "strong legal grounds" to continue charging its high prices based on how Congress wrote the CARES Act.

"Whatever price the lab puts on their public-facing website, that is what has to be paid," she said. "I don't read a whole lot of wiggle room in [the statute]." (Kliff, "The Upshot," New York Times, 9/26)