ACA Grace Period for Late Payments Could Pose Problem for Doctors, Hospitals

Andrew Kitchenman | October 4, 2013 | Health Care
Those who buy insurance through marketplace will have 90 days to pay before coverage is canceled, potentially leaving providers on the hook

Neil Eicher, director of government relations and policy for the New Jersey Hospital Association.
A safeguard designed to protect people who buy health insurance through the new federal marketplace has hospitals, doctors and other healthcare providers concerned that they might not be paid for some services under the Affordable Care Act.

People who don’t pay their monthly insurance premiums will have a 90-day grace period before their coverage is dropped. Federal regulations require insurers to pay claims for the first 30 days after payments lapse. After that, they will be able to deny pending claims, leaving hospitals to foot the bill. In New Jersey, health insurance is generally in force for a 31-day grace period.

“This is going to be a nationwide problem,” said Neil Eicher, director of government relations and policy for the New Jersey Hospital Association. He spoke about the issue at the NJ Spotlight conference “Implementing the Affordable Care Act in New Jersey,” held on September 20.

Eicher said hospitals could be a position where they are informed that a patient’s insurance is still valid, only to learn later that they won’t be paid for the services provided.

Access to the marketplace website has been bogged down since it was launched on Tuesday. The marketplace is intended to be a one-stop shop for people who don’t receive insurance from an employer to buy coverage and learn whether they are eligible for federal tax credits to subsidize their insurance purchase. They are supposed to be able to apply for insurance online, in person, by phone or by mail.

Provider groups in other states have expressed alarm over the 90-day grace period. For example, the Missouri State Medical Association and Missouri Hospital Association wrote a joint letter to the Centers for Medicare & Medicaid Services expressing concern that some people could manipulate the system, paying nine months of premiums for 12 months of coverage. They said many providers may decide to not accept patients covered by the ACA marketplace insurance plans.

Eicher said New Jersey hospitals might be interested in paying patients’ premiums for a short period. He questioned whether it would be “one of those murky things where you want to try to do the right thing, but you want to make sure you’re not in violation of any conflict of interests or legal problems.”

Horizon Blue Cross Blue Shield of New Jersey Vice President Larry Altman said the grace period would present a challenge. He anticipates that Horizon and other insurers will attempt to inform hospitals when patients are delinquent in their premium payments.

“It could be up to the hospital to decide, do they want to have the conversation with the member or the patient about what’s going on and let the patient know that they might be liable” for the costs, Altman said.

Altman said it’s a question of balance between different interests.

“I think it’s a great protection for the consumer, but there has to be the balance,” Altman said.

He compared it to a similar dilemma that developed in Massachusetts, the first state that attempted to reform its health insurance system and a model for the federal Affordable Care Act.

“People would buy health insurance, even buy it on the way to the hospital, get the treatment … and then drop it,” Altman said. “No one’s going to cry for the insurance company in that, but the problem with that for society then is that the only people who would buy health insurance” are those who need it for the month they receive treatment.

“The costs would be astronomical and no one would be able to afford health insurance. It truly would be like buying fire insurance for your home after you have the fire,” said Altman, who leads Horizon’s office of health reform.

Massachusetts fixed the problem – and the ACA prevented it – by only allowing residents to buy insurance during open enrollment periods. The first open enrollment period for the federal marketplace began on October 1 and will continue for six months, until March 31, 2014. Those who purchase insurance by December 15 will have their coverage start on January 1, 2014. In future years, the open enrollment period is expected to last from October 15 until December 7.

The 90-day grace period presents a similar challenge, but Altman said the solution could be imperfect.

“I think if we’re all as a society clear with people about what their responsibilities and what the benefits they get are, to me that seems like the best you can get,” Altman said. “But it’s a balance — there’s no perfect way to handle some of these challenging issues.”

New Jersey Business & Industry Association Vice President Christine Stearns said that the costs from those who are delinquent would ultimately be shifted to those who do pay for their healthcare coverage.

Stearns expressed concern that this will only to add to a problem that small businesses have faced in recent years. A combination of health insurance premium increases and the economic downturn that began with the 2007-2009 recession have pushed 20 percent of small employers to drop coverage, Stearns said.

“That’s about 100,000 people that dropped out of the market,” said Stearns, who handles health and legal affairs for the state’s largest business group. “Maybe they got coverage someplace else, or maybe they became uninsured.”