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September 23, 2022
Health Law Weekly

U.S. Court in Minnesota Dismisses Lab’s Lawsuit Against Insurer over COVID-19 Testing Reimbursement

  • September 23, 2022

The U.S. District Court for the District of Minnesota rejected September 20 GS Labs, Inc.’s lawsuit seeking full reimbursement from Medica Insurance Company for COVID-19 tests provided to defendant’s insureds.

In so holding, the court found that the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) does not include a private right of action against insurers for diagnostic-testing labs to recover reimbursement for COVID-19 testing at their publicly posted cash price.

In response to the pandemic, GS Labs, Inc. opened 50 COVID-19 diagnostic testing sites throughout the United States, including nine in Minnesota. GS Labs alleged it provided COVID-19 tests to 16,000 of Medica’s members in Minnesota, but the insurer refused to reimburse GS Labs for the tests at its publicly posted cash price as required by the CARES Act, § 3202(a).

Section 3202(a) provides that insurers “shall reimburse” providers of diagnostic testing at “an amount that equals the cash price for such service as listed by the provider on a public internet website.”

GS Labs argued that while the CARES Act provision does not expressly provide a private right of action for a provider to seek full reimbursement for COVID-19 testing, there is an implied right of action to do so.

Applying the Supreme Court’s four-factor test for determining whether an implied right of action exists in a federal statute, Cort v. Ash, 422 U.S. 77, 78 (1975), the court rejected GS Labs’ action.

The languages in the CARES Act focuses on the entities subject to regulation—group health plans and insurers—and directs them to reimburse diagnostic testing providers. “It is not rights-creating language sufficient to imply a private right of action,” the court held.

While Section 3202(a) may confer some benefits on diagnostic testing providers, it was primarily designed ensure accessible COVID-19 testing for the public's benefit, the court observed. Under Eighth Circuit precedent, a plaintiff must be the “especial” beneficiary of the statute, not merely an ancillary beneficiary, to give rise to an implied private right of action.

The court also was not persuaded that the lack of an enforcement mechanism in Section 3202 created a private right of action by implication. “[N]othing in the text or structure of the CARES Act suggests the intent to provide providers such as GS Labs with a privately enforceable remedy,” the court said.

GS Labs, Inc. v. Medica Ins. Co., Case No. 21-cv-2400 (SRN/TNL) (D. Minn. Sept. 202, 2022).