ACA Loophole and Potential Impact on Providers

With the implementation of insurance exchange enrollment and the continued 2014 implementation of the Affordable Care Act, potential pitfalls lurk due to loopholes left wide open.

Provisions under the final rules compel qualifying health plans to offer a three month grace period to enrollees who receive advance payments for the premium tax credit. This grace period is extended to those enrollees whose finances qualify for a reduction in out-of-pocket exchange costs. As a result, any qualified enrollee that misses a monthly premium payment will be afforded continuity-of-care throughout the grace period if a premium payment is missed.

The health plans are required to pay all claims in the first month of the three month grace period and then potentially pend any claims made in the subsequent 2 months. The patient will then be required to either pay the premium or pay the claim. The latter becomes what we are all extremely familiar with…a ‘self-pay’ account.

Here is where the loophole exists. If a patient cannot or does not pay the claims or the exchange premium, they may face a tax penalty but no rate increase within the exchange. Enrollees are free to hop from one exchange plan to another in the fourth month, which will entitle them to full health coverage once again.

The ramifications of this could be disastrous for provider revenue. Physicians could be left with handling the second and third month claims as they now handle self-pay claims…rolling these accounts over to a collection agency and eventually written off to bad debt.

This is not to say that it is only providers who encounter difficulties. The exchange rules allow for patients to pay their first month premium with a credit card. The second and third month’s premium must be paid by a check or an electronic funds transfer. Any of these transactions can be difficult for low-income households but this can be an undue burden on those that have no access to financial transactions outside mainstream banking systems.

There are ways to deal with the loophole. First payers may be asked if they participate in the exchanges and how they plan to handle the grace period. Payers are not compelled to hold claims in the second and third months but if they do, payer contract language can be included to allow collecting payment upfront from exchange patients.

Another option is to determine if your group is obligated to participate in exchange products. Not all payers compel providers to participate in “all products.” If this is the case and you must participate in all products, one of which is an exchange product, then one must weigh the positives of participating against remaining non-participating. If all else fails, stay on top of self-pay collections!

It cannot be known at this time how many enrollees may default on the grace period obligations. However, the ramifications of this loophole will likely be felt by many in the provider community.