By: Jon Harol, Founder, LLS
When did an insurer’s decision not to pay for a laboratory test become evidence that the test shouldn’t be performed?
Over more than two decades working in the clinical laboratory industry, I have watched the concept of “medical necessity” become deeply embedded in how we think about laboratory testing. And for good reason.
Healthcare resources are finite. Insurance companies cannot pay for every available test at every frequency for every patient. There must be standards for determining which services an insurance plan will cover, under what circumstances, and how often.
But somewhere along the way, I believe we began confusing two very different questions:
“What should an insurance company be required to pay for?”, and “What testing is reasonable for a patient to receive?”
Those are not the same question. Yet increasingly, particularly as consumer-directed and cash-pay laboratory testing grows, I see the payer’s definition of “medical necessity” treated not merely as a coverage standard, but almost as a moral standard for appropriate healthcare.
If a patient wants testing more frequently than their insurance company considers medically necessary, the testing itself is sometimes viewed skeptically. Is the laboratory encouraging unnecessary utilization? Is the patient being taken advantage of? Is a physician acting irresponsibly by authorizing the testing? Those are legitimate questions to ask.
But there is another question we should be asking as well: Why should an insurance company’s willingness to pay determine the upper boundary of what an informed patient should be able to learn about their own health?
“Not Covered” and “Not Appropriate” Are Not the Same Thing
Jon Harol, Founder, LLS
The language we use matters. Consider the difference between these two statements:
“Your insurance plan does not cover this test under these circumstances.”, and “This test is not medically necessary.”
The first sounds like what it is: a coverage determination. The second sounds like a medical judgment.
And once something has been labeled “not medically necessary,” it is remarkably easy to make the next leap: If it isn’t medically necessary, then perhaps it shouldn’t be done at all. That is where I believe we need to be more careful.
A payer’s medical-necessity policy necessarily reflects more than pure clinical science. It exists within a system of healthcare financing and must consider utilization, cost, population-level benefit, contractual obligations, and the appropriate allocation of finite resources. There is nothing inherently wrong with that. The mistake is assuming that the resulting coverage policy also establishes the boundaries of responsible medical care.
“Not medically necessary for insurance coverage” is not synonymous with “medically inappropriate.”
Cash-Pay Laboratory Testing Is Exposing the Distinction
I encounter this issue increasingly through my work with laboratories developing consumer-directed and cash-pay testing programs.
At Lighthouse Lab Services, we work with laboratories and healthcare companies that use our Authorizing MD Services to provide appropriate physician oversight for laboratory testing. Many of these models look different from the traditional healthcare transaction.
Historically, laboratory testing has largely existed within a familiar framework: Patient → Physician → Laboratory → Insurance Company
The physician identifies a clinical need, orders testing, the laboratory performs the test, and someone submits a claim to an insurer. But the growth of cash-pay and consumer-directed healthcare is creating another pathway: Consumer → Physician Oversight → Laboratory
In this model, the consumer may be initiating the interaction and paying for the testing directly. That changes an important part of the equation.
Suppose a generally healthy person wants to monitor certain biomarkers several times throughout the year. Their insurance company might reasonably determine that, absent a particular diagnosis, symptom, or risk factor, testing that biomarker four times a year isn’t something the health plan should pay for. I have no fundamental objection to that.
Insurance is a mechanism for pooling resources and financing healthcare. Payers have an obligation to establish reasonable coverage standards.
But suppose the patient understands that limitation and says: “That’s fine. I would still like the information, and I’m willing to pay for it myself.”
Now we are dealing with a very different question. If the testing has legitimate clinical meaning, the patient understands its limitations, appropriate physician oversight exists, and the patient is paying for it voluntarily, why should the insurance company’s preferred testing frequency determine whether the patient’s decision is responsible?
Medical Necessity Is a Floor, Not Necessarily a Ceiling
We don’t generally organize the rest of our lives around purchasing only what is strictly “necessary.” People spend their own money on healthier food, fitness programs, wearable technology, preventive services, physical therapy, dental care, nutrition counseling, and countless other things because they believe those investments may improve their health or quality of life.
Some of these interventions have extensive clinical evidence behind them. Others have emerging evidence. And some undoubtedly provide less value than consumers believe they do.
Laboratory testing deserves the same scrutiny. But healthcare should not necessarily be reduced to the minimum level of information or intervention that an insurance policy is obligated to finance.
There can be a large space between medically necessary and medically inappropriate. That space includes services that may be useful, informative, preventive, reassuring, or personally valuable—but which society reasonably decides should not be financed through pooled insurance dollars.
Recognizing that distinction doesn’t undermine medical necessity. It puts medical necessity in its proper context.
More Testing Is Not Always Better
There is an important counterargument that anyone advocating for greater access to laboratory testing needs to acknowledge. More data is not inherently better healthcare.
Laboratory tests can produce false positives. Biomarkers naturally fluctuate. Testing low-risk populations can identify abnormalities that have little clinical significance. Results can create anxiety and lead to additional testing, imaging, procedures, or treatments that ultimately produce more harm than benefit.
There are very good reasons physicians and professional societies sometimes recommend against particular tests or screening practices. Consumer-directed testing should not be exempt from those standards simply because the patient is paying cash. Laboratories also have a responsibility not to exaggerate the clinical significance of their tests or convince consumers that every abnormal result represents disease.
Physician oversight matters. Evidence matters. Appropriate reference ranges and clinical context matter. Clear communication about what a test can—and cannot—tell someone matters. But those concerns should lead us toward responsible testing, not toward the conclusion that the payer’s coverage policy should define responsible testing.
Clinical appropriateness should ultimately be informed by medical evidence, physicians, and patients; not inferred solely from whether a third-party payer is willing to reimburse for a service.
Who Gets to Decide How Often I Look?
The emergence of wearable technology makes this distinction particularly interesting. Millions of Americans now continuously monitor steps, heart rate, sleep, oxygen saturation, heart rhythm, exercise performance, and increasingly glucose and other physiological measures. Nobody asks whether it is “medically necessary” for my watch to measure my heart rate hundreds of times today.
We recognize that access to information about our bodies can have value even when an insurance company isn’t paying for it. Laboratory medicine is different, of course. A blood test is not the same thing as checking your step count, and laboratory results can lead to medical decisions that carry consequences.
But the philosophical question is becoming increasingly difficult to ignore: How much information should people be allowed to obtain about their own biology?
And perhaps more importantly: Who should decide?
For most of modern healthcare, the payer has had enormous influence over that answer because the payer was ultimately financing the transaction. But consumer-directed healthcare is beginning to separate access from reimbursement.
That forces us to confront something we may have taken for granted: Was the payer determining what medicine was appropriate, or simply determining what medicine it was willing to buy?
The Moral High Ground
This is where I believe the language of medical necessity has had an unintended consequence. Over time, a financial and coverage concept has acquired a moral dimension. If insurance covers something, we tend to perceive it as legitimate healthcare. If insurance considers something medically unnecessary, we can begin to perceive the service itself as unnecessary, wasteful, or even exploitative.
Sometimes that perception is correct. But sometimes the insurer is simply saying: “We’re not paying for that.”
Those are very different conclusions. Payers should absolutely be able to say that a particular test, performed at a particular frequency in a particular population, does not provide enough benefit to justify using pooled insurance dollars to pay for it. What we should resist is allowing that decision to automatically become a judgment that an informed patient spending their own money should not obtain the test.
There is no contradiction in saying: “Insurance shouldn’t have to pay for this.”
While simultaneously saying: “A patient may reasonably decide this information is valuable enough to purchase.”
A More Consumer-Driven Future
Healthcare is becoming more consumer-driven whether the traditional healthcare system is ready for it or not.
Patients have unprecedented access to medical information. They track their own health data. They order genetic tests. They use wearables. They participate in longevity and wellness programs. They increasingly expect access to their laboratory data and want to understand trends rather than simply receive a phone call when something falls outside a reference range.
The laboratory industry will need to adapt to this reality responsibly. That means maintaining appropriate medical oversight. It means protecting patients from misleading claims. It means helping consumers understand that a laboratory result is information—not necessarily a diagnosis. And it means acknowledging when evidence tells us that additional testing creates more harm than benefit.
But it also means respecting patient agency. Medical necessity remains an essential concept in healthcare reimbursement. Insurance companies need rational standards for determining what they will and will not cover. We should simply be careful not to confuse those standards with the outer boundaries of responsible medicine.
A payer can reasonably determine that testing a particular biomarker four times a year isn’t something an insurance pool should finance. That doesn’t necessarily mean a patient who chooses to pay for that information is behaving irresponsibly. And it doesn’t necessarily mean a physician who helps that patient obtain and appropriately interpret the information is practicing bad medicine.
As healthcare becomes increasingly consumer-driven, we need to separate two questions that have been intertwined for decades:
What should insurance pay for?, and What information should people be able to obtain about their own health?
They aren’t the same question.
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