The passage of the Affordable Care Act (ACA) in 2010 reigned in a new era of federal health care oversight, along with many unanswered questions and rising anxiety among patients, providers and insurers. Among those questions were how the ACA's "grace period" for coverage purchased on an insurance exchange would be interpreted and how that provision would balance the interests of insurers, patients and providers alike. The grace period requires "[a]n issuer of a qualified health plan" to "allow a 3-month grace period for nonpayment of premiums before discontinuing coverage."1 This allows patients who purchase a Qualified Health Plan (QHP) on the exchange who miss making premium payments for three months to continue being covered under their plans. Pursuant to the regulations implementing this provision, an insurer may terminate a member after three months of nonpayment, so long as the insurer provides the requisite notice.2
The grace period does not apply to every new health plan, but applies to those plans that are paid for with a premium tax credit. This tax credit is not available to all patients. Rather, applicants for the premium tax credit must fulfill several requirements. For example, such applicants must have a household income of greater than or equal to 100 percent but not more than 400 percent of the federal poverty level.3
Originally, the Centers for Medicare and Medicaid Services (CMS) proposed a rule that required insurers to pay claims for coverage during the grace period. That provision, however, was modified in the final rule. In attempting to strike a balance between the rights of the three parties, CMS allowed the insurer to pend payment of claims during the second and third months of delinquency, but required the insurer to continue to pay claims during the first month. Under current New Jersey law, insurers are required to allow a 31-day grace period for nonpayment of a premium.4 By contrast, the new ACA regulation requires insurers to keep patients enrolled in health plans for three months following nonpayment of a premium, but allows the insurance carrier to hold provide payments for months two and three. This situation poses a significant financial risk to providers.
Currently, New Jersey law requires "prompt payment of claims" on provider bills submitted via electronic means. "Prompt payment" is defined as no later than 30 days.5 This provision may conflict with the ACA's allowance of the three-month grace period for individuals receiving an advanced premium tax credit. In many circumstances, federal rule preempts state law, where the two conflict directly. However, in instances in which a state law creates a more stringent requirement, the state law may prevail notwithstanding a more lenient federal requirement. Ultimately, the conflict between these two provisions may have to be decided by a court. In any event, the 31-day state law provision would still apply to all QHP Exchange-covered patients not receiving an advanced premium tax credit.
The ACA regulations do require insurers to notify providers in the second and third months of nonpayment, but provider advocacy groups are concerned that such notices will come late or not at all. Thus, under the new health care payment landscape, providers could end up treating a patient for two months before realizing the patient is no longer entitled to insurance payment benefits.
The interplay between the ACA statute and the implementing regulations strikes another blow to providers. Because the ACA allows for the three months' grace period before "discontinuing coverage," the patient is still technically covered by the policy during this time, yet claims for services rendered in the second and third months of the grace period may not be getting paid. This may result, for example, in the provider being bound by the health plan's allowable claim limits and/or balance billing rules because the patient is still technically covered under the insurance policy even though the insurer is not obligated to pay claims. However, the regulations do allow for coverage termination to be retroactive to the first month.6 For example, if a patient fails to pay the premium for March and fails to pay the next two subsequent premiums, coverage will be terminated retroactively back to March 31.7 Providers can then bill patients directly for April and May.
What solutions are there for providers that fear being left uncompensated for two months of payments? One option is not to accept patients on an individual Exchange-purchased QHP (an option to be chosen carefully, and only if the provider is not contracted with the QHP to render services to such patients, the services are nonemergent, and no other state or federal law obligates the provider to render the services), or to provide care on a cash basis only, but these options are not a reality for many providers.
There are, however, some safeguards that providers can put into place to mitigate the grace-period provision. One action for providers is to reach out to the Exchange Plan and set up an electronic notification system that would immediately send the provider a notice once a patient defaults on an insurance premium for the first time. To add teeth to this provision, providers could include an indemnification provision in their participating provider contract during the next negotiation term whereby the Plan would have to indemnify the provider for its costs and expenses if the insurer fails to notify the provider within a set time period following the first missed premium payment.
Another safeguard providers can implement is to check a patient's insurance status before major procedures. Although it may be burdensome to check current insurance coverage for every visit, providers may want to set a dollar amount that triggers an insurance check. If the patient's estimated cost for that visit or that specific procedure exceeds a specified dollar amount, then the provider could check with the insurance company regarding coverage to find out whether a nonpremium payment notice has or will be sent. Such a system would need to accommodate a large number of inquiries from various providers and report insurance status with the confidence to ensure providers do not render care for free and ensure patients are not inappropriately denied medical care based on an insurer's error.
New Jersey hospital providers have the option of making financial arrangements prior to rendering a service or performing a procedure in a nonemergency situation. Such arrangements are only available where the patient does not furnish proof of health insurance and is not eligible for Medicaid, charity care or other state assistance programs.8 In these uncommon cases, the hospital may require proof of financial ability prior to performing a nonemergency procedure or treatment. Medical screening exams under EMTALA and related state laws would still apply. It is unclear whether a hospital that verifies a patient's premium payment delinquency with the health plan can enter such a payment arrangement, given the patient's status as, technically, covered under the plan during the grace period.
However, such providers could consider arranging a type of "security deposit" system, after checking to see if their contract with the QHP and applicable state law allows. After receiving notice of the patient's failure to pay the first premium, providers could ask for a security deposit for nonemergency provider services. Once the provider receives payment from the health plan, the patient's security deposit would be returned. Physician providers should, however, take caution not to abruptly discontinue their relationship with a patient in violation of their state's licensing requirements. For example, the New Jersey Board of Medical Examiners (BME) regulations require providers to give patients 30 days' advanced notice before discontinuing the patient-physician relationship, and physicians cannot discontinue the relationship during the course of treatment.
While health care providers, unfortunately,
appear to have few tools to protect themselves against the ACA
grace period provision, by combining some of the suggestions made
in this article, providers may be able to reduce some risk of
patient default. In the end, some providers may
either have to hold out for more "clarification" on how
to manage during
the grace period, accept insolvent patients as a part of doing
business or move to an all-cash model.
Footnotes
- 42 USC 18082 (c)(2)(B).
- 45 CFR 156.270(d); 77 Fed. Reg. 18310.
- 45 CFR 155.305(f).
- New Jersey Division of Banking and Insurance, available at: http://www.state.nj.us/dobi/division_insurance/ihcseh/ihcguide/keyfeatures.html#guarantee
- N.J.A.C. § 11:22-1.5.
- 72 Fed. Reg. 18310, 18427 (March 27, 2012).
- Although the ACA has been interpreted to allow retroactive termination, the plain language of the statute allows for a three month grace period "before discontinuing coverage," which could result in a legal challenge in the future.
- N.J.S.A. 26:2H-18.63.
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