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PROVIDERS BEWARE: ACA GRACE PERIOD PROVISION MAY LEAD TO UNCOMPENSATED CARE

May 2014
Susan B. Orr, Esquire and Nicole J. Radziewicz, Esquire

A  provision of the Affordable Care Act (“ACA”) related to grace periods for participants in subsidized Qualified Health Plans may pose payment problems for physicians. The rule provides for a ninety (90) day grace period before termination for non-payment of premiums is permitted, during which time insurers are only obligated to pay costs incurred for services rendered during the first thirty (30) days.

By way of background, Qualified Health Plans (“QHPs”) are health plans that are offered in a government-sponsored health insurance exchange. QHPs must provide essential health benefits, and  are subject to the ACA market reforms, including the restrictions on annual and lifetime limits. QHPs must be certified as being compliant by the health insurance exchange within which they operate. 

Individuals obtaining QHP coverage may be eligible to receive government assistance to defray the costs of acquiring the same. Generally, individuals making up to 400% of the federal poverty level are eligible for government subsidies in the form of premium tax credits. Persons eligible to receive the credit have the option of: (i) having the entire sum advanced and allocated evenly across all premium payments, (ii) having part of the credit advanced and applied across premium payments, with the balance being refunded as part of his/her tax return, or (iii) receiving the entire credit as part of  his/her income tax return.

Specific to government-subsidized QHPs is a ninety-day “grace period” related to termination for non-payment of premiums. Under the final regulations, a “QHP issuer must provide a grace period of three consecutive months if an enrollee receiving advance payments of the premium tax credit has previously paid at least one full month's premium during the benefit year.” During the grace period, the QHP issuer must:

(1) Pay all appropriate claims for services rendered to the enrollee during the first month of the grace period and may pend claims for services rendered to the enrollee in the second and third months of the grace period;

(2) Notify HHS of such non-payment; and,

 (3) Notify providers of the possibility for denied claims when an enrollee is in the second and third months of the grace period.

In other words, although insurers are responsible for paying providers for medical services rendered during the first thirty (30) days following a patient’s premium default, they have no obligation to pay for claims designated as pending during the next sixty (60) days, if the plan is terminated at the end of the ninety (90) day period.

The new regulatory scheme places the majority of the risk of loss associated with QHP non-payment grace periods on providers. In response, medical trade associations, including the American Medical Association,  have encouraged their members to implement policies and practices to mitigate loss inherent to providing care during grace periods, primarily through patient education and diligent monitoring of insurance status. Further, these groups have called for greater clarification with respect to the insurer notice provision.

Specifically, concern has been voiced with respect to the provider notification provision due to its lack of a finite notification time frame. Stakeholders have lobbied the Obama administration to clarify when and how notice must be provided, recommending that it be mandated within the first month of the grace period. It is CMS’ expectation that issuers will provide this notice within the first month of the grace period and throughout months two and three. Issuers can opt to provide this notice by several means, however, they are encouraged to provide this notice whenever responding to an eligibility verification request from a health or dental care provider. Although CMS’ position aligns with that of interested stakeholders, its guidance may be inadequate as it fails to set forth any binding norms. 

Overall, risks related to the grace period rule can be mitigated in a few ways. Some providers may choose not to furnish care to participants in a QHP. Alternatives may include reaching out to QHP issuers regarding automatic electronic notification techniques. Although largely contingent on the technological capabilities of the issuer, with the proliferation of electronic health records (“EHR”) and health information exchanges (“HIE”), such an arrangement is not beyond the realm of possibility. Further, providers should diligently check insurance status before conducting major procedures or providing expensive services. Finally, in non-emergency situations, providers should consider requiring cash payment up-front.   

For more information, contact either Susan B. Orr, Esquire at Rhoads & Sinon, LLP at 610-423-4200 or sorr@rhoads-sinon.com or Nicole Radziewicz, Esquire at 717-231-6623 or nradziewicz@rhoads-sinon.com.