A provision of the Affordable Care Act (ACA) has created a 90-day grace period that goes into effect before insurance policies can be cancelled for non-payment. This new rule has physicians concerned that the law could leave them unable to collect payment for treatments rendered, which could create a significant financial risk for medical practices and hospitals.
The law provides patients who obtain subsidized coverage through state insurance exchanges a 90-day grace period before their policies can be cancelled for non-payment. Insurers are responsible for the first 30 days of care, but doctors will be stuck without payment for any services during the second and third months. Insurers may hold off paying the claims and ultimately can deny them if the patient doesn’t catch up on premium payments. Doctors can bill patients directly but may have difficulty collecting.
The original version of the bill required that the insurance company cover medical bills for all three months of the grace period, but lawmakers changed the language after strong opposition by the insurance companies. The American Medical Association (AMA), which strongly supported the ACA, is not happy. “The grace period rule imposes a risk for uncompensated care on physicians,” says AMA President Ardis Dee Hoven. “Managing risk is typically a role for insurers, but the grace period rule transfers two-thirds of that risk from insurers to health care providers.”
James A. Stroud, CPA, a healthcare consultant with Warren Averett in Birmingham, says the grace period is a major issue for physicians. “When corporations paid premiums for health coverage, we didn’t have this problem,” he says. “But when individuals purchase insurance, physician practices lose the certainty that premiums will be paid each month. That shifts the exposure from the insurance company to the provider. If the patient doesn’t pay, it’s the doctor or hospital that takes the hit.”
Stroud also points out that currently, only a small percentage of people in Alabama have signed up for health care through an exchange. “By 2020, that number is expected to be 90 percent. If that happens, it will be a big problem,” he says.
To further complicate the situation, there is currently no system in place to notify physicians and hospitals when a patient falls into the grace period. Without that information, physicians will continue to treat patients, assuming premiums have been paid. “If a patient hasn’t paid premiums for the first 30 days, the provider doesn’t know about it,” says Mary F. Elliott, CPA, Chief Operating Officer for Warren Averett. “It does indicate payments pending for the next 60 days, but if coverage lapses after the 89th day, the provider will not get paid unless they go to the patient directly.”
Stroud says another potential scenario can occur if a patient makes the first premium payment and goes to the doctor and receives a plan of treatment. “It can be costly to the medical practice to purchase drugs, especially for cancer treatment,” Stroud says. “If, during treatment, the patient stops paying premiums and the insurance company drops the coverage, the physician will be liable for the costs incurred. Because of their commitment to care for the patient and medical liability issues, the physician can’t drop the patient.”
Maddox Casey, Warren Averett’s Service Area Leader for Healthcare in North Alabama, sees potential abuse by patients as a result of the grace period rule. “There may be a lot of unhealthy people on the exchange plans, and they could pay premiums for one month and then drop the insurance,” he says. “One way to help collect from these patients is to get a credit card on file for each of them.”
Elliott says they are advising their health care clients on the importance of having good practice management systems. “Just because a patient has an insurance card doesn’t mean he has coverage,” she says. “They must look up each patient, one at a time, to determine if they are covered. Most practices don’t have enough personnel to verify each patient, but they need to know in real time if they have insurance coverage.”
Technology will eventually catch up with the law, but for now each practice will have to work out details for their individual situations. Stroud recommends that medical practices have financial counselors available to speak with patients prior to any procedures being performed. “The counselor can explain the cost to the patient and discuss the options for payment,” he says. “The art of collection is what we are working on with our clients. This is revenue cycle management and it’s a big deal. It will be an even bigger deal in the future.”
