To Submit Claims to Payors or Not to Submit:

A Challenging Question

COVID-19 cases continue to spike across the country and testing for the virus is likely to remain a fixture of our lives. But who pays for it? Federal law passed in response to the COVID-19 pandemic generally requires insurance companies to provide blanket coverage for all FDA approved or authorized tests without any cost sharing, prior authorization, or other medical management requirements. However, federal agencies tasked with implementing those laws have issued guidance that arguably creates a loophole for payors to deny coverage and creates a problem for industry participants who operate in the lab space.

A.  Federal Legislation: Establishes Blanket Coverage for COVID-19 Testing

Congress passed the Families First Coronavirus Response Act on March 18, 2020 (FFCRA). Pursuant to the FFCRA, group health plans and health insurance companies are generally required to cover FDA approved, cleared, or authorized COVID-19 tests without imposing cost sharing requirements, prior authorization, or other medical management requirements.[1] The purpose of the statute is obvious. – i.e., to increase access to testing and eliminate financial barriers to individuals receiving the tests. If COVID-19 tests are covered, more people are likely to get tested, especially if they do not have to worry about co-pays, coinsurance, or other cost sharing measures.

B.  Guidance from Administrative Agencies: Establishes an Arguable Loophole for Insurers

However, the three agencies tasked with implementing the FFCRA – the United States Departments of Labor (DOL), Health and Human Services (HHS), and Treasury – issued guidance that arguably creates a loophole for payors to deny coverage for certain categories of COVID-19 testing. According to the guidance, insurance companies are not required to cover tests conducted to “screen for general workplace health and safety (such as employee ‘return to work’ programs), for public health surveillance. . . or for any other purpose not primarily intended for individualized diagnosis or treatment of COVID-19 or another health condition.”[2] As more fully discussed below, this creates a problem for industry participants in the laboratory space because it limits coverage to a certain category of testing that is difficult to define – i.e., “testing intended for individualized diagnosis or treatment of COVID-19.”

C.  Response from Congressional Democrats: The Loophole is Without Basis in the Law

Congressional leaders in the US House of Representatives were immediately critical of the guidance and the arguable loophole it creates. In fact, on July 7, 2020, five representatives sent a public letter to the Secretaries of HHS, DOL, and Treasury imploring them to “take immediate action to clarify the obligations of group health plans and insurers to provide robust and comprehensive coverage of COVID-19 testing.”[3] According to the letter,

The requirement [from the guidance] that the testing be “primarily intended for individualized diagnosis or treatment of COVID-19” was not included in the statutory language of the Families First Act and the CARES Act. This interpretation of the Families First Act is not supported by the statute, which makes clear that health plans are required to cover, without any conditions or limitations, the specified items and services related to diagnostic tests for the detection of COVID-19.”     

To date, however, the Secretaries have not revised their guidance and payors have started denying claims and removing comprehensive coverage for COVID-19 tests, particularly for those tests performed on asymptomatic individuals. In fact, on September 22, 2020, nine Senators sent a letter to the nation’s largest health insurance companies after reports that the payors were ending comprehensive coverage of COVID-19 tests.[4] The letter stressed the importance of testing and requests the payors to explain their coverage policies with particular emphasis on coverage for tests performed on asymptomatic individuals.

D.  The Problem for Industry Participants

HHS, DOL, and Treasury have made a distinction between COVID-19 tests that are primarily intended for individualized diagnosis or treatment of the virus and all other tests. This distinction is inherently ill-defined and difficult to apply in practice, at least in some instances.  Nonetheless, the distinction is meaningful for certain interested parties who need tests performed for various reasons and the labs that intend to perform those tests. For example, college sports teams may be interested in regularly conducting tests to ensure the safety of their athletes and those around them. Nobody contends that these tests should not be performed, but how should the lab get paid for them? Should the school pay for them or should the lab submit the claims to payors? There are obvious financial considerations involved as many interested parties – like the school – do not have the financial resources to pay for the quantity of tests they require. But coverage is limited to those tests “performed for the individualized diagnosis of the virus” and does not include routine surveillance testing, at least pursuant to current federal guidance.

This places interested parties who need testing, healthcare providers who order the testing, and labs who perform the testing in difficult positions:

• Interested parties face financial pressure to create circumstances that permit the lab to bill the tests to the payor. In this way, they are incentivized to find providers who feel the tests are performed for individualized diagnosis.
• Moreover, determining whether a test is performed for individualized diagnosis of the virus is not always clear, particularly in situations like routine testing of school athletes. This can present challenging situations for healthcare providers.
• Payors have started asking labs for information the payors know the labs do not have – i.e., medical records that show a test is performed for individualized diagnosis of COVID-19. This exposes the lab to recoupment efforts.

Traditionally, the lab business involves testing samples submitted with valid requisitions, producing results, and billing claims. The uncertainty associated with coverage for covid-19 testing, however, unnecessarily complicates this traditional business model. Payors are likely to start asking labs to demonstrate that covid-19 tests were performed “for the purpose of individualized diagnosis.” The payors know the labs do not have this information but will likely rely on the labs inability to produce it as a basis for recoupment efforts. This may compel labs to rethink business arrangements and billing for covid-19 tests. Just because payors are paying claims now does not mean they will not try to recoup those payments in the future.

This challenge is generally a problem associated with receiving payment for routine testing. Under current federal guidance from HHS, DOL, and Treasury, this type of testing is not subject to coverage under the FFCRA. However, the election of a new president makes it unclear as to whether there is going to be continuity with current federal guidance, particularly if the response from Congress serves as any guide to the new administration. For the time being, labs, interested parties who need tests, and healthcare providers are in a tough position with respect to submitting certain claims for COVID-19 tests to payors.

The attorneys at Elliott Sauter help industry participants navigate these difficult questions. Please do not hesitate to call us with any questions or concerns. We can be reached at (469) 758 – 4150.

[1] Public Law 116-127; Accessible Here: https://www.congress.gov/bill/116th-congress/house-bill/6201/text

[2] FAQS About Families First Coronavirus Response Act and Coronavirus Aid, Relief, And Economic Security Act Implementation Part 43; Accessible Here: https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/faqs/aca-part-43.pdf

[3] https://energycommerce.house.gov/sites/democrats.energycommerce.house.gov/files/documents/HHS.DOL_.DOT_.2020.7.7.pdf

[4] https://www.hassan.senate.gov/imo/media/doc/Letters%20to%20Top%20Health%20Insurers%20(Combined).pdf