Health Plans Improperly Trying to Reduce Reimbursement Related to COVID-19

King & Spalding

Some health plans are trying to improperly reduce reimbursement owed to providers for services related to COVID-19 by unilaterally carving out those services from existing provider contracts – e.g., Aetna, certain Blues, etc. Plans are employing a variety of methods to make these reductions, such as proposals to amend existing contracts, notices of purported policy changes, and even informal emails describing payment rates for these services. Most contracts already have broad enough terms to cover COVID-19 testing and treatment, and therefore these unilateral efforts by the health plans to amend the contract terms to reduce the amounts paid for COVID-19 testing and treatment should not be effective to change contract rates. If your contract terms include service categories that are broad enough to include these types of services, you do not have to agree to accept a lower rate from health plans and you can challenge the proposed lower rates.

The premise behind all of these notices is that services related to COVID-19 are “new” rather than already covered in the contract. Health plan contracts routinely define the rates by broad categories of services that by nature would include services related to Covid-19. For example, every year patients need tests, diagnoses, and treatments caused by a wide variety of viruses or bacteria. There may be different or new strains of virus or bacterium each year, but the rates in the contracts have applied the same way every year. There is nothing in the typical provider contract to permit health plans to pay differently when the services required relate to COVID-19. For example, if the contract has rates for testing, pneumonia, a ventilator, or otherwise, those rates apply regardless of the underlying cause for these medically necessary services.

Health plans may argue that COVID-19 is different than previous diseases. But so is any new ailment that causes the need for already existing categories of services. By analogy, a contract that covers services required to test and treat lung disease does not distinguish between causes like tobacco, which has existed for centuries, versus asbestos, which only came into wide use in the 20th century, versus some new industrial product that might come onto the market in the future. Unless you have a contract that specifically sets different rates based on the cause of the illness or lacks any rates for the category of services that are needed for the illness, the health plan cannot pay differently or less.

While the COVID-19 pandemic has required unprecedented responses by many governmental and private entities, it does not allow payers to impose unilateral modifications to lower reimbursement under their health plan contracts. The law typically holds parties to the terms of their contract without permitting unilateral modifications and usually does not permit one-way modifications regardless of whether the contract specifies details on the amendment process. Health plans cannot simply pay what they unilaterally choose.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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