(Bloomberg) — Less than two months before health exchanges open to the public, hospitals are asking to change a part of the Affordable Care Act that leaves them at financial risk for patients who fall behind on their insurance premiums.
The hospitals said in an Aug. 15 letter that the U.S. Centers for Medicare and Medicaid Services should reconsider the way health insurance exchanges divide the financial responsibility for delinquent customers. The letter was signed by the American Hospital Association, the Federation of American Hospitals, and the Association of American Medical Colleges.
“We are very concerned about our risk for giving uncompensated care,” says Joanne Alig, senior vice president for policy and research at the Wisconsin Hospital Association.
The conflict arose when regulations written to implement the core parts of the ACA next year created a 90-day grace period before insurers can drop patients who fall behind on premiums. Insurers balked and the Obama administration changed the rules so that the financial burden for the first 30 days fell on insurers, while hospitals would carry the default risk for care provided in the remaining 60 days.
“Hospitals are right to be worried,” says Sheryl Skolnick, an analyst in Stamford, Connecticut, for CRT Capital Group LLC. The goal of the health law “was for the hospitals to no longer be the insurer of last resort. There must be some other solution than putting this on the back of the hospitals.”
‘Unfair’ risk
The ACA was designed to eliminate much of the industry’s unpaid care by expanding health insurance coverage to at least 25 million Americans who now lack it. The core parts of that effort — an expansion of Medicaid programs and the opening of state-run exchanges that sell government-subsidized plans — are scheduled to take effect in January.
Changing the rules to shift most of the grace-period liability from insurers may now leave hospitals without adequate financial protection.
“The provider will take the patient and probably confirm with the insurance company that the patient is covered, and there’s a false sense of security that they’re going to get paid,” says Amy Gordon, a partner at the law firm McDermott Will & Emery LLP whose work focuses on health law compliance. “The provider doesn’t know at the time that someone’s not going to pay their premium. It’s an unfair transaction because it’s operating from a false set of facts and circumstances.”
Deadline approaches
The dispute over a regulation finalized in March 2012 and set to be applied when health exchanges begin selling plans Oct. 1, adds to concern about whether the Obama administration can successfully implement the president’s health care system overhaul. When asked why hospitals are now raising objections so close to the rule’s start date, Alig says the industry has been preoccupied with the numerous other regulations of the $1.3 trillion ACA.
“There are pages and pages of federal rules around the insurance exchanges and everyone’s been trying to wrap their heads around it,” Alig says. “Some of these details sort of got put on the back burner as we were dealing with other large aspects of the ACA. People have been trying to figure out all of the moving parts in the ACA.”
While the rules require insurers to tell health-care providers when patients are behind on their premium payments, the standard for such notifications isn’t rigid enough, according to Missouri Hospital Association President Herb Kuhn and Missouri State Medical Association Executive Vice President Thomas Holloway. They are asking CMS Administrator Marilyn Tavenner to revert to the original proposal that would have insurers shoulder the risk for the entire 90-day grace period.
Doctor participation
“If the current rules cannot be amended or interpreted in a more equitable manner, we fear there will be a widespread reluctance among physicians and other providers to participate in exchange plans,” Kuhn and Holloway said in a Aug. 12 letter to Tavenner. “As a result, many patients — especially those in underserved areas— will find it very difficult to find physicians and other providers willing and able to provide their care.”
CMS, which is responsible for implementing most of the health law, declined to comment about the grace-period rule. The main lobbying group for health insurers, America’s Health Insurance Plans, also declined to comment.
“The devil’s in the details and no one probably thought about what happens to the expenses during this grace period,” Skolnick says. “You’re not seeing widespread participation for exchange-based products among hospitals. The level of skepticism and the level of caution are very high.”
