While social distancing restrictions associated with COVID-19 are on the wane, lawsuits seeking reimbursement for COVID-19 testing are on the rise. The issue is whether federal legislation passed at the onset of the Pandemic allows out-of-network test providers essentially to name their price for the tests they offer—even if that price far exceeds the going rate.

Employers—particularly those that self-fund their health benefits–have an interest in the outcome, since it is they (and often their employees) who will ultimately foot the bill. But these cases also raise larger questions about how disputes over state and federal health benefit mandates should be resolved.

At the heart of the current testing fee controversy is a provision in the Coronavirus Aid, Relief, and Economic Security (CARES) Act requiring that (absent specific arrangements), health plans provide “first dollar” coverage in an “amount that equals the cash price for [testing] services as listed by the provider on a public internet website.” Relying on this provision, as well as related regulations that limit medical management techniques in adjudicating claims, some out-of-network testing providers have charged from several hundred dollars to $900 for tests, even though the industry average for similar tests have been in the $130-$150 range.

After encountering pushback from insurers and claims administrators, out of network providers have sued to recover reimbursement for thousands of claims, primarily arguing that the CARES Act provides them with a private cause of action for reimbursement at the “cash price” they listed on their websites. Last week, however, after applying the four-factor Cort v. Ash test, the court in Murphy Medical Associates, LLC v. Cigna Health and Life Insurance Company, No. 3:20-CV-01675-JBA (D. Conn. March 11, 2022) rejected that argument, pointing, among other things, to the absence of Congressional intent for a private remedy.

Rather, it treated the provider’s reimbursement claims as typical out of network claims for ERISA health benefits–at least with respect to tests administered for participants in employer-sponsored plans. Although the Court held that a claim for benefits under ERISA was sufficiently plead, it made clear that, as in other ERISA benefit litigation, the provider must have received from its patients a valid assignment, which yet may be subject to a plan’s anti-assignment clause. Evidence of the provider’s right to sue for each of the tests it administered will be relevant at trial.

Although benefit claims typically require allegations that the respective health plans actually covered the services provided, the court did not require such allegations, reasoning that the CARES Act effectively modified the terms of the respective plans to cover testing as provided in the statute and associated regulations. The Court did not address, however, whether the testing was for diagnostic purposes as opposed to purposes of “surveillance,” i.e. testing to satisfy public health or employment requirements, which do not fall within the federal mandate. See DOL FAQ’s About Family First Coronavirus Response Act and Coronavirus Aid, Relief, and Economic Security Act Implementation Part 44, Q.2.

In other words, as reiterated in later regulatory guidance regarding over the counter COVID-19 tests, Plans are required to cover some but not all tests. See DOL FAQs About Affordable Care Act Implementation Part 51, Families First Coronavirus Response Act And Coronavirus Aid, Relief, and Economic Security Act Implementation, Q4.  Arguably, allegations that tests meet the statutory criteria are necessary to establish coverage. See Almont Ambulatory Surgery Center, LLC v. UnitedHealth Group, 99 F. Supp. 3d 1110, 1155-60 (C.D. Cal. 2015). They may also be relevant to failure to exhaust administrative remedies defenses, as well as subject to proof at trial.

Notwithstanding the Murphy Medical decision, the existence of a CARES Act private cause of action remains a hotly debated issue. In Diagnostic Affiliates of Northeast Hou, LLC. v. United Healthcare Services, 2022 WL 214101 (S.D. Tex. Jan. 15, 2022), the Court found a private cause of action under the CARES Act, allowing the provider to challenge the plan’s denials independent of ERISA’s requirements. The Court also sustained the provider’s alternative ERISA benefit claims without requiring it to allege assignments for the various tests for which it sought reimbursement, in part because it had already found a private right of action. Underscoring the financial interests that employers may have in these cases, the provider in Diagnostic Affiliates sued 70 self-funded employers in addition to their claims administrator.

Striking a cautionary note for plans that may suspect fraud or price gouging, the Murphy Medical court let stand a “tortious interference” claim arising out of statements the defendants made in notices of denials or explanations of benefits. Unlike other state law claims dismissed as pre-empted, the court ruled that the provider had alleged conduct independent of the benefits denials.

Nevertheless, plans have a variety of options for bringing a provider’s wrongful practices to the fore. In addition to challenging the legitimacy of the provider’s “cash price” as a defense on the merits, plans may also bring claims and counterclaims for recoupment or declaratory relief, though, as is often the case with ERISA, close attention must be paid to pre-emption, standing and other procedural hurdles. See supra, Almont, 121 F. Supp. 3d 950.

As noted, in addition to affecting the pocketbooks of plan sponsors, COVID-19 testing cases raise broader implications for resolving the increasing number of claims that involve mandated benefits. To claims seeking such benefits, Plans may find that rigorous application of ERISA’s rules and protections often provides the best defense.