Skip to main content

Free COVID-19 Tests Highlight Delivery System Pathways and Payer Choices

Analysis  |  By Laura Beerman  
   January 24, 2022

"[W]e recognize that the Administration’s guidance takes steps to mitigate the real risks of price gouging, fraud, and abuse, which would limit access and reduce affordability for everyone." — Matt Eyles, AHIP president and CEO

COVIDTests.gov went live on January 18: one day before its official launch and roughly one week after the Biden administration's requirement that insurers cover test costs for their members. The mandate, its timing, and how payers are responding reveal a delivery system in motion. Payers must calculate new priorities against existing financial performance and strategy, which the pandemic has already impacted in the billions.

Anyone can order from COVIDTests.gov and receive up to four free tests. Under the mandate program, insurers are required to pay for up to eight eligible tests per month for their individual and/or group members. Eligible tests must be FDA authorized, cleared, or approved. Carriers must also pay for tests that exceed the monthly limit that are "ordered or administered by a health care provider following an individualized clinical assessment, including for those who may need them due to underlying medical conditions."

While four free tests total versus eight monthly represents a coverage gap between the insured and uninsured, both strategies help ensure that testing costs are less of a burden. This is particularly important now that the highly contagious Omicron variant is causing schools and businesses to shut down voluntarily due to staff illness, with negative test results required to return to work following a now-shorter, five-day isolation period.

One website, one mandate, many reveals

There are many ways of looking at these dynamics and their parallel impacts.

COVIDTests.gov and the payer testing coverage mandate are examples of a delivery system working the right way. Both steer consumers toward the most cost-effective service and setting: free tests available online or at a preferred pharmacy/retail settings versus tests with wildly variable price tags, delivered by overburdened providers in higher-cost settings.

Health plans and their national association, AHIP, appear to agree. AHIP president and CEO Matt Eyles has commented: "[W]e recognize that the Administration’s guidance takes steps to mitigate the real risks of price gouging, fraud, and abuse, which would limit access and reduce affordability for everyone."

Despite this, however, costs, reimbursement, and processes are wildly divergent. Under its new mandate, the Biden Administration wants insured consumers to be able to walk into a designated pharmacy or retailer and walk out with a test at no charge. Additionally, it is incentivizing payers to make tests available in this way—or online—to cover costs upfront and eliminate member claims submission. For members who chose not to go this route when the preferred provider option is available, the cost of a test is essentially no longer free, with the government setting a reimbursement limit of $12 for OTC test purchases.

For their part, and to defray some mandate costs, many carriers are using their websites to steer members toward COVIDTests.gov for their first four OTC kits. In addition, not all health plans are offering the most expedient options. In a recent press release, AHIP summarized multiple insurer approaches ranging from tests that are immediately available for online ordering through a preferred vendor link (Virginia-based OptimaHealth) to descriptions of the manual claim reimbursement process—either paired or not with the plan's intent to make online or no-upfront-cost ordering available (Highmark, in Pennsylvania and the mid-Atlantic). For the latter, plans are either leaving it at that or informing members that their approach is evolving.

Payer choices

AHIP has been tracking payer COVID-19 response during the pandemic, highlighting the coronavirus treatment cost-sharing waivers of its members. Well before the free OTC test mandate, however, there was evidence that things were changing according to an August 2021 study by the Kaiser Family Foundation (KFF) and the Peterson Center on Healthcare.

"Earlier in the pandemic, we found that the vast majority (88%) of people enrolled in fully-insured private health plans nonetheless would have had their out-of-pocket costs waived if they were hospitalized with COVID-19." Following vaccine availability and by the fall of 2020, the study found that "72% of the two largest insurers in each state and DC (102 health plans) … [were] no longer waiving these costs," with another 10% planning to do the same.

About these waiver decisions, the study authors add: "At the time, health insurers were highly profitable due to lower-than-expected health care use, while hospitals and health care workers were overwhelmed with COVID-19 patients." A May 2021 analysis from the National Academy of Medicine (NAM) concurred: "Payers initially experienced cost reductions due to care delays, but then experienced a subsequent increase in operating expenses due to the growing volume of COVID-19 patients and the resumption of deferred health services."

The shifting landscape

The NAM study further highlights that "as insurance is an industry premised on forecasting and risk assessment, the fundamentally unpredictable nature of a pandemic created significant challenges for payer operations in 2021 (e.g., pricing, enrollment)." While numerous payers reported significant losses throughout most of last year as members no longer deferred care, some have begun to rebound.

With this, payers appear to be applying the above-mentioned forecasting and risk assessment to the new OTC mandate—balancing the speed of test and reimbursement against the pace of the Omicron variant, whose highly infectious yet less severe nature suggests the virus may be transitioning from a high-cost pandemic to a lower-cost over time endemic. The image is one of multiple cost and operational levers turning at once to balance response and financial stability.

The best of a bad (but improving) situation

There is no doubt that the pandemic has created wins in the face of tremendous losses. The NAM study notes: "The pandemic has both provided momentum to implement long-overdue changes in health care delivery (e.g., flexibilities for virtual care) while highlighting the need to accelerate ongoing efforts to transform payment systems (e.g., the transition to APMs). Notably, COVID-19 has also fostered new, innovative partnerships between payers and other sectors …" It adds, however, that "COVID-19 has illustrated how misaligned financial incentives and the fragmentation of services across sectors contribute to inefficiencies and inequities in the American health system."

Even with the delivery system gains illustrated by COVIDTests.gov and the payer coverage mandate, it is difficult to ignore that free OTC tests have been available in the UK since the spring of 2021. And consumers are still at risk for surprise bills, particularly if they seek tests from expensive sites like hospitals where testing costs have ranged from $20–$1,419—"not including the price of a provider visit, facility fee, or specimen collection," as reported by KFF and the Peterson Center in April 2021. While consumers are far less likely to go this route when they can get multiple tests for free, it is an example of a delivery system that still has many wrong doors.

Laura Beerman is a contributing writer for HealthLeaders.


KEY TAKEAWAYS

Free OTC tests for COVID-19 are now available via a federal government's website and the Biden administration's payer coverage mandate.

These options highlight both the U.S. healthcare delivery system's efficiencies and fragmentations as insurers define their processes.

These processes balance availability, efficiency, and risk/financial forecasting as the nation hopes to turn the corner from pandemic to endemic.


Get the latest on healthcare leadership in your inbox.