Premium Payment Programs for ACA-Subsidized Enrollees – The Last Word?

Hospitals have a long-standing practice of paying health insurance premiums, particularly COBRA continuation coverage premiums, for patients to maintain coverage of hospital services if the patient cannot afford the premium. Paying a premium to continue insurance coverage is a small cost for a hospital rather than providing the same services on an uncompensated basis to an uninsured patient. Premium payment of a benevolent nature to ensure that a patient’s course of medical treatments may continue has long been a practice of hospital foundations and unrelated private, not-for-profit foundations.

The practice of paying health insurance premiums arises in the health reform context. Due to the 90-day premium payment “grace period” for individuals receiving subsidized tax credits for health insurance obtained under the Affordable Care Act (ACA), hospitals and other health care providers are at financial risk if the patient fails to pay his premium to the health insurance company. Last year, hospitals and other providers began speculating that they may pay the premiums of ACA-subsidized patients who are in the grace period and have been furnished high cost services. Many questions have been raised as the following confluence of events has occurred:

1. The ACA’s individual mandate for the purchase of coverage through health insurance exchanges formally took effect on January 1, 2014. Certain individuals meeting financial criteria may receive advance premium tax credits to assist them in the purchase of qualified health plans (QHP) through the state and federal health insurance exchanges. If the subsidized individual cannot afford his portion of the premium, the health insurance company must provide an ACA-mandated 90-day grace period for the enrollee to pay his premium before the individual loses coverage. The ACA requires the QHP to pay the health services claim for the initial 30 days of the grace period. No retroactive termination of coverage applies to claims paid in this time period. The QHP is allowed to withhold payments for health care services during the next 60 days. Though the federal rules implementing ACA require QHPs to provide grace period notice to providers, the rules do not specify when that notice must be given – a point of serious opposition by health care providers. In most states, QHPs may “pend” claims during the 60-day period until the premiums are paid or the grace period expires. In Texas, QHPs must pay providers during the 60-day period in accordance with Texas prompt payment laws and rules for claims payment deadlines. However, QHPs will be able to recoup any payments made during the 60-day period if the insurance is retroactively cancelled due to nonpayment of premiums. Providers will then have to pursue the patient for payment of the entire bill, rather than just the deductible and coinsurance. (QHP grace periods for non-subsidized individuals are governed by state laws–up to 31 days in Texas– whether the QHP is purchased through the federal or state health insurance exchanges.)
2. In August 2013, HHS Secretary Sebelius stated the federal government does not consider QHPs to be “federal health care programs” within the meaning of the Anti-Kickback/Civil Monetary Penalties (CMP) statutes. Anti-Kickback/CMP only apply to payments that induce the purchase of services under federal health care programs, or influence an individual to choose a particular provider to provide such services. Providers saw her statement as permitting the payment of subsidized patients’ delinquent QHP premiums.
3. A few days later, the Centers for Medicare and Medicaid Services (CMS) issued a FAQ indicating it had significant concerns with third parties, such as hospitals and other health care providers, paying QHP premiums as the practice could “skew the insurance risk pool and create an un-level field” for QHPs. Not only did CMS discourage the practice, it advised insurers to reject premium payments from providers. CMS warned that it intended to monitor the practice and take appropriate action. No data was presented to show how the insurance risk pools could be “skewed”, and no laws or regulations were cited that would allow CMS to take action against providers making QHP premium payments.
4. A November, 2013 memo from CMS re-iterated the concerns expressed in the FAQ. CMS stated that HHS has broad authority to regulate the ACA health insurance marketplaces. New codes relating to the ACA grace period were issued:

   a) Claim Adjustment Reason Code 257 for the pending of the claim during the premium payment grace period;
   and

   b) Remittance Advice Remark Code N698 regarding reversal due to non-payment of premiums by the end of the grace period resulting in loss of coverage.

5. In November, 2013, Senator Grassley challenged the HHS Secretary’s determination that QHPs do not fall within the definition of “federal health care programs” and requested the basis for the decision. Three months later, Secretary Sebellius responded to Senator Grassley’s letter, but he later alleged that her response avoided providing any substantive explanation for her determination.
6. A second FAQ in February, 2014, clarified that the CMS position did not mean “all” third parties who pay QHP premiums were discouraged. Premium payments from state and federal government programs or grantees, including Ryan White HIV/AIDS programs, are acceptable. Private, not-for-profit foundations that assess patients on the basis of financial need criteria, and not based on health status considerations, were also deemed acceptable as long as the premium payment covered an entire plan year and not just the month of the episode generating the high health care costs. A month later, an interim final rule (IFR) addressed the issue again and expanded the list of acceptable third parties to pay QHP premiums to include Indian tribes and other tribal organizations. CMS stated its policy on acceptable third party premium payers does not prevent QHPs from prohibiting patients from accepting other third party premium payments, and banning hospitals and other health care providers from making premium payments.

As the American Medical Association notes in its recent grace period toolkit, providers should exercise “extreme caution” prior to discussing direct QHP premium assistance with patients. The Texas Patient Non-Solicitation Act may be implicated if direct or indirect premium payment by a health care provider is intended to solicit or secure the patient. Generally, a provider limits its COBRA and health insurance premium assistance programs to patients who have incurred, incur, or will incur, substantial unfunded charges for health care services for which the expected health insurance reimbursement will exceed the amount of the premium and estimated costs of the services. Such premium assistance is unlikely to induce a patient to receive unnecessary services because the patient has already been furnished the services, or would otherwise obtain the services. Hospital policies for COBRA premium assistance programs typically contain strict financial eligibility criteria and an episode-based length of time for premium payments.

Hospitals and other providers establishing direct premium payment programs for ACA-subsidized individuals will be facing QHP resistance to such payments. With CMS encouragement in the absence of any direct legal authority for CMS to prohibit or regulate such programs, QHPs may revise their contracts and administrative policies to defect direct premium payment. Providers may wish to use the CMS guidance in its FAQs and IFR as the safest mechanism for premium assistance and make their donations to charitable organizations. If a provider has not engaged previously in the practice of paying COBRA or other health insurance premiums, it should consider working with an experienced health law attorney on how to implement such a practice for ACA grace period patients.

UPDATE – March 27, 2017

Health insurance companies participating in national and state exchanges reacted strongly to the possibility of health care providers paying premiums of ACA-subsidized enrollees. For example, BCBSTX warned it would not accept premium or cost-sharing payments from any party other than the enrollee, the enrollee’s family, and required entities (Ryan White HIV/AIDS programs, federal and state government programs or grantees, Indian tribes, tribal organizations and urban Indian organizations). Initially, BCBSTX stated it would choose, in its sole discretion, whether to allow cost-sharing and premium payments from not-for-profit foundations. The policy was revised to accept the payments only if the foundation made the financial assistance available to the enrollee: (1) for the entire coverage period of the enrollee’s policy, (2) based solely on financial need criteria, (c) regardless of the enrollee’s health status, and (4) regardless of which insurance issuer and/or benefit plan the enrollee chooses. Cost-sharing payments from other third parties—hospitals and other health care providers–were prohibited from applying to an enrollee’s coverage.

Hospitals and health care providers countered the restrictions of the health insurance companies by directing charitable funding to affiliated not-for-profit foundations. Allegedly, some providers referred Medicare and Medicaid patients to their affiliated foundations for premium financial assistance to enroll them in ACA exchange health plans. Thus, plans would pay providers higher reimbursements for providing the same health care services as the lower-paying Medicare and Medicaid programs. In a July 2016 federal court lawsuit, UnitedHealthcare of Florida claims that American Renal Associates committed fraud by convincing its Medicare and Medicaid dialysis patients to switch their government health plans and enroll in United’s exchange plans with the financial assistance of the American Kidney Fund, a foundation with a dialysis patient premium payment program funded by dialysis providers.

The lawsuit and health insurance companies’ complaints led CMS to issue an August 2016 request for information seeking public comment on concerns that some health care providers and provider-affiliated foundations may be steering persons eligible for receiving Medicare and/or Medicaid benefits into ACA-exchange individual health plans to obtain higher reimbursements. CMS expressed concern that such steering was improper if it was to influence individuals away from Medicare or Medicaid coverage for financial gain. CMS alleged that such business practices raise overall health system costs, result in higher out-of-pocket costs for enrollees, disrupt patient care and care coordination efforts, and increase the cost of ACA-exchange coverage by negatively impacting the individual market risk pool.

After reviewing hundreds of public comments, CMS issued interim final regulations in December 2016 prohibiting renal dialysis facilities from making premium patients to ACA-exchange health plans without disclosing to a health plan that a third party payment will be made, and obtaining assurance that the payment will be accepted by the plan. The rule also required dialysis providers to provide information to patients about government-based and private health plan coverage options, enrollment periods, and cost estimates for those options. The rule did not bar dialysis providers from making contributions to not-for-profit foundations providing premium and cost-sharing financial assistance to dialysis patients.

However, a federal court in east Texas blocked the CMS regulations from going into effect in January 2017. The court found that CMS, without good cause, issued the regulations without notice and comment periods as required under the Administrative Procedures Act.