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Zipper manufacturer closes temporarily after COVID-19 testing costs skyrocket

California’s decision to shift more COVID-19 testing costs onto private health insurance companies has wreaked havoc on Talon International, a Woodland Hills-based zipper manufacturer.

Talon, which also produces custom labels and patches, had been contracting with Kyla, a San Jose company, to provide weekly testing to its 28 workers for $9.99 per employee per month via its software.

But since UnitedHealthCare, Talon’s insurance company, is no longer obligated to pay for routine testing, Kyla’s monthly fee now includes another $260 per employee for testing, upping the monthly cost to $270.

That hiked Talon’s cost to test all of its workers to $7,560 from $280 a month and prompted CEO Larry Dyne to temporarily shutter the company’s Woodland Hills facility and send workers back to their home offices.

“We had one employee test positive, so I sent them all home to quarantine,” he said. “The weekly testing was our insurance policy. It gave our employees a high level of confidence that their workplace was safe. But then the rules changed the whole landscape.”

Talon discontinued its association with Kyla six weeks ago, and Dyne plans to reassess his company’s options in the next few weeks.

“We’ll be looking for an alternative solution,” he said. “We may even consider having a private nurse come in to do the testing. That would probably run $75 to $100 per employee per month … but it would still be cheaper.”

Gov. Gavin Newsom’s administration is encouraging people to seek coronavirus testing at doctor’s offices and clinics to free up state-funded testing sites for Californians who are harder to reach through the traditional medical system.

New guidelines

Newsom and other state officials had previously encouraged all Californians to get free testing at state-funded sites in their communities, many of which are drive-through operations.

The California Department of Managed Health Care’s revamped guidelines say essential and nonessential workers who display no symptoms and have no known exposure are subject to prior authorization requirements, meaning they must now shoulder co-pay and insurance deductible costs.

Health insurers are now able to request charts to evaluate the medical necessity of suspected exposure, and they can evaluate whether an employee is an essential worker.

In short, they can challenge any claim.

“The new regulation puts us in a tough predicament,” Dyne said. “Employee safety is very important to us, but the state’s new guidelines have created an impediment to allowing our employees to get back to work at our facility.”

Caught in the middle

Kyla co-founder and CEO Garick Hismatullin said his company, which operates about 20 urgent care centers, is caught in the middle.

“The new regulations say insurers won’t cover the cost of frequent routine testing of nonessential and essential employees,” he said. “And unless you are having symptoms or have still suspected exposure then the co-pays and deductibles apply.”

Kyla must now pay upfront for testing and the company often won’t know for 45 days or longer whether the insurer will reimburse it for any of the costs.

“We’ve had to comply with what the state of California says,” Hismatullin said. “So we pivoted and redesigned our cost structure. We can still do weekly testing for $9.99 per employee per month for the software component, but now it costs another $260.”

Kyla lost about 15% of its business since the new regulations kicked in, but it still contracts with 150 companies that employ more than 10,000 workers.

“Sixty percent are still doing weekly testing, 24% test twice a month and the others are doing outbreak prevention only,” Hismatullin said.

Source: Orange County Register

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