COVID-19 Test Lab Sues Plans and TPAs for Failing to Cover Cost of Tests as Per FFCRA and CARES Act

April 13, 2022
Hall Benefits Law, LLC

The Families First Coronavirus Response Act (FFCRA) and the Coronavirus Act, Relief, and Economic Security Act (CARES) Act and related guidance require group health plans and insurers to cover the costs of COVID-19 diagnostic testing without cost-sharing, prior authorization, or other medical management requirements. If plans do not negotiate a rate for the testing, they must pay for the testing at the cash rate posted on the provider’s public website. 

A lab posted their COVID-19 testing rates of $900 per test on their public website. They sued various health plans and third-party administrators (TPAs) in Diagnostic Affiliates of N.E. Hou, LLC v. United Healthcare Servs., 2022 WL 214101 (S.D. Tex. 2022). The lab alleged that the plans and TPAs violated FFCRA and the CARES Act by failing to pay the lab’s posted COVID-19 test rates. 

The court allowed the lab’s lawsuit to proceed, finding that FFCRA and the Cares Act created “implied private right[s] of action,” allowing the lab to sue the insurers and TPAs for its required reimbursement. Furthermore, the lab could seek benefits under ERISA, as the plan participants had assigned their right to benefits to the lab when they received testing services. Finally, the court allowed the lab’s claims under the Racketeer Influenced and Corrupt Organizations (RICO) Act to go forward. The lab claimed that the plans and TPAs had violated RICO by participating in a “calculated and coordinated effort to delay, deny, and reduce the recovery [the provider] could make for its COVID-19 testing services and to profit by doing so.”

The court’s opinion acknowledged some plans’ arguments that the lab’s publicly advertised cost of $900 per test was unreasonably high. However, the FFCRA and CARES Act are silent on any means of challenging an unreasonably high test cost if the parties are unable to reach an alternative agreement. As a result, the court did not foreclose the possibility that the plans and TPAs might have a counterclaim against the lab on that issue. 

HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.

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Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.

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