I thought I'd lost my mind when I read a news reference to a three-month grace period health insurers must provide to customers who buy coverage through Obamacare exchanges and then don't pay premiums, but which could leave providers uncompensated for services rendered during the last two months of that grace period. As it turns out, though, I'm not the one who lost his mind — that honor belongs to the authors of the Affordable Care Act. Yes, the law really does require that insurers must keep deadbeats on their rolls for three months, but that they only have to pay claims submitted during the first month.
The Advisory Board, a research firm specializing in health care and higher education, has the details:
The loophole: A grace period for exchange purchasers
Under the final rules, qualifying health plans must offer a three month grace period to enrollees who receive advance payments for premium tax credit (offered to low-income enrollees in order to reduce out-of-pocket exchange costs) and miss a monthly premium payment. This will enhance continuity of care for those who cannot afford premiums for certain months due to job loss or other financial constraints.
Financial responsibility falls to providers
Qualified health plans are required to pay all claims in the first month of the grace period but can pend claims made in the second and third months, at which point the patient must pay either the claim or their exchange premium. If they cannot afford the payment, then claims during this second and third month can go uncompensated.
So what does this mean? Patients with unpaid claims face a tax penalty but are not charged with a rate increase, issued a repayment order, or even banned from participating in another exchange. In essence, enrollees can jump from one exchange plan to the next every four months—and still receive full health coverage.
If you're thinking that a consulting firm might just try to scare customers and potential customers, here's a similar write-up from a Summary of Final Rule on Establishment of Exchanges and Standards for Qualified Health Plans (PDF) from America's Health Insurance Plans, a trade organization. AHIP presents the rule as a victory, since earlier versions would have put them on the hook for all claims during that grace period.
Grace period for non-payment of premiums by individuals receiving advance payments of the premium tax credit. Under the final rules, qualified health plans must provide a grace period of three consecutive months if an enrollee receiving advance payments of the premium tax credit previously paid at least one month's premium during the benefit year, consist ent with the proposed rules. However, the final rule requires qualified health plans to pay all appropriate claims during the first month of the grace period, but may pend claims in the second and third months of the grace period. The proposed rules would have required qualified health plans to pay all appropriate claims during the three month grace period.
A casual survey of available health care providers — I told my wife in between patient appointments — elicited a truly impressive string of profanity. No wonder, since the Advisory Board points out, "The loophole could take a serious toll on provider collections. Physicians may be left paying for a patients' treatment during months two and three of the grace period, causing an uptick in bad debt collections."
Not too surprisingly, the Advisory Board suggests that small practices might want to consider refusing exchange plans, if they can, so that they don't, you know, go broke.