Court dismisses GS Labs lawsuit against Medica over COVID tests

A federal judge has dismissed a lawsuit from Omaha-based GS Labs that alleged Medica, a health insurer based in Minnetonka, failed to provide full payment for thousands of COVID-19 tests.

The federal CARES Act of 2020 gave Americans access to COVID-19 tests with no out-of-pocket costs, but the law did not give labs a right to sue health insurers over payment terms for the service, according to the Tuesday ruling from Judge Susan Richard Nelson of the U.S. District Court of Minnesota.

GS Labs brought the lawsuit in October saying it hadn't been fully paid for providing tests to more than 16,000 enrollees in Medica health plans. In a motion to dismiss filed in December, Medica alleged the testing company was trying to collect on "unconscionable prices."

"We appreciate the court dismissing the case," the health insurer said Wednesday in a statement.

"Medica takes seriously its obligation to protect the health care dollars entrusted to us by our customers and members," the company said. "Our goal with providers is to always pay rates that reflect fair prices and that promote an affordable, predictable experience for our members, in compliance with the law."

GS Labs said in a statement to the Star Tribune that the company is reviewing its legal options.

Earlier this year, Eagan-based Blue Cross and Blue Shield of Minnesota sued GS Labs, alleging the testing company had engaged in "profiteering off the pandemic." The case is ongoing.

On Tuesday, an attorney for Blue Cross sent a letter to the judge in its case, highlighting the Medica dismissal and arguing counterclaims by GS Labs are "materially identical" to those in the dismissed case.

In its own filing Tuesday, GS Labs said it provided tests to 70,000 enrollees at Blue Cross and called the insurer's motion to dismiss the lab's counterclaims "a cynical move to shirk its responsibilities."

Officials with GS Labs have said they decided in early 2020 to invest in and open about 50 testing sites across the U.S., including several in Minnesota.

The company's lawsuit against Medica cited language in the CARES Act that stated if a health plan had a negotiated rate with a lab provider, the discounted rate should be applied throughout the public health emergency. But if the health plan didn't have a negotiated rate, the insurer "shall reimburse the provider in an amount that equals the cash price for such service as listed by the provider on a public internet website."

"Medica and GS Labs have not agreed upon a different negotiated cash price, and their discussions have broken down and are at an impasse," the lab argued in its complaint. "GS Labs has now been forced to bring this complaint to obtain reimbursement and other damages resulting from Medica's brazen refusals to reimburse GS Labs."

GS Labs was sued twice in 2021 by health insurers that alleged it was charging too much for tests. Both cases are ongoing.

Washington-based Premera Blue Cross alleged that posted charges of $380 to $979 per test at GS Labs were "extraordinarily high." A separate lawsuit from Blue Cross and Blue Shield of Kansas City, Mo., alleged the lab's claims for payment "amount to unlawful price gouging and disaster profiteering."