Actions against insurers over COVID test coverage set to ramp up

Health care facilities across the country are fighting insurance providers’ refusal to compensate the costs of COVID testing, and a recent federal court decision in Texas may be the catalyst for an influx of similar suits.

The various suits are filed by out-of-network providers of COVID-19 testing against insurance companies for declining to provide reimbursement for tests the plaintiffs conducted. The suits allege, among other counts, violations of the Families First Coronavirus Response Act and Coronavirus Aid, Relief and Economic Security Act, which require insurers to cover COVID testing regardless of whether it is conducted by in-network or out-of-network providers. 

A recent decision from U.S. District Judge Nelva Ramos of the Southern District of Texas denied in part a group of insurance providers’ motion to dismiss the suit against them. Ramos found that, contrary to the defendant’s arguments, plaintiff Diagnostic Affiliates of Northeast Hou LLC had ”an implied private right of action to enforce the provisions of the FFCRA and CARES Act reimbursement requirement.”

Insurers maintained that the acts contained no private right of action, but Ramos said Congress’ intent in passing the acts implied a private right of action to enforce the reimbursement requirement.

Other suits in Connecticut and New Jersey federal court over compensation for tests are up against similar arguments from insurance providers looking to dismiss, and the Texas plaintiff’s attorney says he hopes Ramos’ decision will lead to similar rulings for those cases as well.

The decision is “huge for every provider in the country,” said Ebadullah Khan, chief legal officer for the plaintiff, which operates as 24 Hour Covid. The company currently has one other ongoing case, and Khan said it is gearing up to file suit against other insurance providers now that the court determined providers have standing to sue. 

The suit on which Ramos ruled, captioned Diagnostic Affiliates of Northeast Hou v. United Health Group, lists nearly 70 insurance providers as defendants. 

“I think there’s gonna be a lot of these from different practices,” said Harris Beach’s Roy Breitenbach. Breitenbach is leading half a dozen suits in the U.S. District Court for the District of Connecticut on behalf of Murphy Medical Associates against various insurance providers, including Cigna Health and Life Insurance Co. and Yale University. Murphy Medical’s earliest suit, against Cigna, was filed in November 2020 and is currently scheduled for oral argument in February on Cigna’s motion to dismiss.

Stradley Ronon Stevens & Young’s Zaara Nazir, who is defending Molina Healthcare Inc. in one of Murphy Medical’s suits, said she’s seen litigation over insurance coverage for COVID-19 testing increasing, and that insurance providers are keeping a close eye on pending litigation since there is little precedent in the area. She said suits are on the rise because providers “improperly bill for additional unnecessary services or testing or price gouge the cost of COVID-19 testing.”

“Further guidance from the Department of Labor, Department of Health and Human Services and the Department of Treasury to address improper bundling and price gouging of COVID-19 testing would help lessen the prevalence of disputes and litigation over insurance coverage for COVID-19 testing,” said Nazir.

In addition to FFCRA and CARES Act claims, most of the suits also bring counts of ERISA violations. Ramos’ decision points to mixed success for such claims. She dismissed 24 Hour Covid’s ERISA violation claim that the defendants failed to provide a full and fair review of the insurance claims, but she sustained a count of failure to to pay.

She also dismissed the plaintiff’s count of unjust enrichment—a claim that appears across many of the complaints—on the grounds that the plaintiff did not provide a benefit to the insurer.