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Beware the Reimbursement Gap

By Greg Freeman  
   June 25, 2014

If a patient doesn't pay his health insurance premiums, the insurer doesn't have to pay the provider for care rendered during the grace period. That means that up to two months of provider services may not be reimbursed.

This article appears in the July, 2014 issue of Managed Care Contracting and Reimbursement Advisor.

A little-known provision in the Patient Protection and Affordable Care Act could leave physicians holding the bag when patients don't pay their insurance premiums, yet doctors are obligated to provide care during a grace period.

If the patient doesn't pay up, the insurer doesn't have to pay the doctor for care provided in the grace period. That means that up to two months of your services are not reimbursed.

The reimbursement gap is made possible by rules that extend the time services are deemed covered in the event that a lapse in payment occurs. Current laws and regulations vary by state, with some states allowing insurers to drop consumers' policies without advance notice and others requiring a 30-day grace period.

The PPACA imposes a mandatory 90-day grace period for patients to pay their outstanding premiums and requires insurers to reimburse providers for care during the first 30 days of the grace period.

In that situation, the PPACA provides no remedy for providers to recoup the money from the insurer. Physicians who want their money must work directly with patients to collect the balance incurred during days 31–90 of the grace period.

Insurers have previously borne the financial responsibility for care provided in the grace period, says Nicholas D. Jurkowitz, JD, a healthcare attorney with the law firm of Fenton Nelson in Los Angeles. They were able to absorb the costs more easily than physician practices will, he says.

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"A short little window can expose physicians to tremendous cost risks that could be significant," Jurkowitz says. "A primary care physician may not lose that much on a routine visit, but another physician who performs a procedure, uses expensive equipment, or provides costly medication may be hit much harder."

Devon M. Herrick, PhD, senior fellow at the National Center for Policy Analysis in Dallas, agrees, saying "this could be a huge problem." One potential remedy, he notes, could be for the healthcare provider to pay the delinquent premiums for the patient, ensuring that expensive care is reimbursed.

"But why would an insurer communicate the fact to a hospital or physician that their patient is delinquent in paying health premiums, knowing they would pay the premiums?" Herrick says. "The insurer would have to then begin paying medical claims, presumably costing far more than the delinquent premiums."

When charges are not reimbursed, the physician practice is free to pursue payment from the patient, but of course that is a challenge even under the best circumstances. In this situation, Jurkowitz says, patients are unlikely to have the money if they failed to pay their premiums. In addition, they also may be confused about whether they have insurance, what the grace period means, and who truly owes the money—them or the insurer.

Insurers are unlikely to notify physicians about a patient's failure to pay his or her premium, although Washington state recently passed a law requiring notice of a grace period. Even if the insurer does notify the physician, it would be difficult to deny the patient treatment in response, Jurkowitz says.

An in-network physician contracted by the insurer cannot turn away the patient even if he or she is known to be in a grace period, he explains. After all, that is what the grace period is all about—letting patients continue to receive care while they catch up with their premiums.

If the patient volunteers that he or she is in a grace period—or if the insurer notifies the practice—then the physician could make prudent decisions about the types of care provided during that period, he says. The key is to involve the patient in the decision-making process and to show how it is in the patient's best interest to avoid expensive care that might be necessary or could be delayed.

Make sure you frame the discussion in terms of saving the patient from unwanted debt, rather than yourself. "It's about educating the patient, who ultimately is the one responsible for the debt that is not reimbursed," Jurkowitz says.

"You can discuss the treatment options, and if there are things that are not medically necessary right now, perhaps you could defer them to later when the premiums are paid. The clinical decisions will have to be made one by one, but involve the patient and make the point of trying to save the patient from the fees incurred."

However, Jurkowitz cautions that it is risky to ask patients if they are up to date with premiums. Technically you can, he says, but it could create the wrong impression about your treatment decisions.

"That could expose you to charges of avoiding medically necessary care, basing your treatment decisions on whether or not you were going to be paid for it," he says. "If the physician asks the question and the answer is not good, how are you going to change their treatment decision? Asking the question up front tilts the balance in a bad way, differently than if the patient or insurer tells you and then you help the patient with treatment options."

Pre-authorization may be misleading during the grace period, Jurkowitz warns. The insurer's pre- authorization usually serves as assurance that the practice will be paid, but that won't be the case in the grace period. An insurer may authorize the treatment up front and then deny payment because of the grace period, he says, and there won't be anything you can do about it.

"Any strategy for mitigating the cost of the unreimbursed care is going to come with an administrative cost, whether that is staff on the phone trying to find out if a patient is in a grace period, or tracking down the patient to pay the bill," Jurkowitz says.

"Physician practices should expect there will be some cost from this grace period issue, and the potential impact depends mostly on what type of care you provide." And is it possible that insurers might pay for the grace period charges, even though the PPACA gives them an out?

"I suppose if the physician group is large enough or somehow has enough clout, they might be able to persuade the insurer to pay for something that they are not legally obligated to pay. But I haven't heard of anyone planning to do that," Jurkowitz says. "That is not typically the way they operate."


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