There is a loophole in the public exchange marketplace that physicians should be aware of as they plan for continued or expanded participation in networks serving patients purchasing plans through the Affordable Care Act.
To offer plans on a healthcare exchange, qualifying health plans must offer a three month grace period to certain enrollees who miss a monthly premium payment. The enrollees affected are generally those who receive advance payments for premium tax credit (offered to low-income enrollees in order to reduce out-of-pocket exchange costs). This rule was designed to enhance continuity of care for those who cannot afford premiums for certain months due to job loss or other financial constraints. But it also creates significant financial risk for physicians providing care to these individuals.
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 unreimbursed. Patients with unpaid claims face a tax penalty to make up for the tax credit they received toward premiums but are not charged with a rate increase, issue, forced to repay the premium in arrears or banned from participating in another exchange. This potentially creates a scenario whereby enrollees can jump from one exchange plan to the next every four months—and still receive full health coverage.
The loophole could take a serious hit on provider collections. Physicians may be left paying for a patients’ treatment during months two and three of the grace period, creating an uptick in bad debt and unreimbursed care.
It is still too early to predict how many enrollees will defect on their premium payments. Most health insurance exchanges accept credit cards for the first month’s premium payment but require a check or electronic funds transfer for subsequent payments. This requirement potentially makes it more difficult for enrollees to manage payment logistics after the first premium payment, further amplifying the number of enrollees that may default on their premium payments.
Given the number of major insurers that include an "all product" clause in their contracts to prevent providers from opting out of exchange products, it may be difficult for practices to avoid this risk in the short-term. Providers should make sure they have adequate policies and procedures in place to collect as much of this money as possible and be in contact with each of their major payers to understand how they will be informed if a plan participant falls into this grace period.