ACA Grace Period Places Burden on Providers and Hospitals

January 26, 2015 | Health Services

The Patient Protection and Affordable Care Act (ACA) was enacted to enable patients to make informed choices regarding their healthcare by providing stability and flexibility in insurance coverage.  To facilitate the implementation of stable coverage, the ACA requires that qualified health plans (QHPs) provide a grace period of three consecutive months if an enrollee, receiving advance payment of the premium tax credit, has previously paid at least one full month’s premium during the benefit year.[1]  The QHP must pay for all appropriate claims rendered during the first month of the grace period but may pend claims for services rendered to the enrollee in the second and third months of the grace period.[2]  If the enrollee does not pay for past due premiums, the QHP may deny to pay for such claims incurred during the months when no premium has been paid, regardless of whether they are appropriate or medically necessary. 

In addition, the QHP must notify providers of the possibility for denied claims when an enrollee is in the second and third months of the grace period.[3]  This notification requirement is not triggered unless and until the provider submits a claim to the QHP for services rendered to the enrollee during the second or third month.  Such a discrepancy leaves providers in a questionable position in which either of two scenarios is likely.  First, the provider may be “stuck with the bill” when they are notified by the QHP that the patient, for whom they have already rendered legitimate services, is in their grace period and such services may not be reimbursed by the QHP.  Second, the provider may be compelled to require staff to confirm a patient’s coverage status before scheduling an appointment or rendering services. The latter may result in a provider being unwilling to treat patients who are in the second or third month of their grace period.  Such scenarios threaten the financial viability of practices and jeopardize the provider-patient relationship. The ACA unfortunately does not account for the critical time period in which the provider is rendering services unaware that the patient may be in their second or third grace period months. Failure by the patient to pay the premium for the grace period results in a retroactive disenrollment effective the first day of the second month. 

The ACA grace period and notification upon submission of claims is illusive in that the provider can render services in the first month and be reimbursed.  Accordingly, the provider may continue providing services, under the impression that the patient is covered, only to discover that services that have already been rendered in the second or third month of the grace period may not be reimbursed.  Providers may render services regardless, as to not disturb the continuity of care, but leave themselves in a financially disadvantageous position.  Essentially, the burden shifts to the provider who must either seek to confirm the patient’s coverage status well in advance or pursue payment from patients of low income, who have already received for medical services rendered.

The American Medical Association (AMA) has raised issues regarding the grace period stating that “a number of questions concerning the specifics of notification, as well as other issues of concern to physicians, have yet to be addressed.”  The AMA provides model financial agreement language for patients receiving advance premium tax credits and a grace period collections policy checklist to enable providers to collect from patients whose coverage is retroactively terminated.  The New York State Senate has proposed legislation to address such concerns including a bill which requires that a QHP provide information regarding the enrollee’s eligibility status within three business days, upon request by a provider.[4]  The proposed bill also requires provider notification that an enrollee is in the grace period within three business days after submission of a claim or status request for services provided.[5]  Although dissemination of such information in an expeditious manner is advantageous, providers still have the onus of requesting such information from the QHP, particularly if they would like such information prior to rendering services.  Providers’ ability to obtain this information timely also assumes the QHP will provide accurate and timely information on eligibility.

The Medical Society of the State of New York (MSSNY) has also raised concerns regarding the grace period stating that “the numerous circumstances where there will be perceived but not actual coverage is going to cause great confusion for physician offices…[and] being required to collect bad debts from patients delinquent on their premiums is expensive and impractical.”[6]  In conjunction with the AMA and state and national specialty medical associations, MSSNY has asked Congress to repeal this provision of the ACA.  Additionally, MSSNY has raised issues with the New York State Department of Financial Services (DFS), asking that plans be required to make immediate payment of claims which were pending under the grace period within two business days and update QHP eligibility systems within 24-hours so providers can be informed that a patient has entered a grace period in a timely manner.[7] 

It is imperative for providers to pursue alternatives to address the potential adverse impact of the ACA grace period.  In an effort to provide continuous comprehensive care, third parties may seek to pay an enrollee’s premium, facilitating the reimbursement of medical services.  However, not all third parties are currently treated the same.  In a FAQ issued in February 2015, the Centers for Medicare and Medicaid Services (CMS) stated that QHPs may accept third party premium and cost-sharing payments made by Indian tribes, tribal organizations, urban Indian organizations, as well as by state and federal government programs such as the Ryan White HIV/AIDS Program.  This was further affirmed by 45 CFR 156 which was amended to require the acceptance of premium payments from the abovementioned third parties.  45 CFR 156 does not prevent QHPs from contractually prohibiting acceptance of premium payments from other third parties.  CMS has discouraged QHPs from accepting premium payments from other third parties, particularly hospitals and providers, stating that such payments could skew the insurance risk pool and create an unlevel competitive field.  Payment by third parties is a creative solution to prevent circumstances in which providers and hospitals will seek to avoid treating patients covered by the health care exchange to prevent future reimbursement and financial issues.  The New York State Senate has proposed legislation stating that a health care plan, insurer, or corporation “shall not contract or in any other manner refuse to accept premium or any required cost sharing payments from third-parties if made by a health care provider, or a private, not-for-profit foundation, on behalf of an enrollee who satisfies defined criteria that are based on financial status and do not consider health status, and the payment covers the entire policy year.”[8]  

Although third party payment of premiums is a proactive manner in which providers may ensure continuity of care, such a solution could potentially implicate an anti-kickback issue.  The anti-kickback statute makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce or reward referrals of items or services reimbursable by Federal health care program.[9]  This issue is negated, however, by a 2013 letter issued by the Secretary of the Department of Health and Human Services (HHS), Kathleen Sebelius, stating that HHS does not consider QHPs, other programs related to the Federally-facilitated or state-based marketplaces, and other programs under Title I of the ACA to be federal health care programs.  Another legal implication may result from an interpretation of New York Education Law 6530(17) which states that exercising undue influence on the patient in such a manner as to exploit the patient for the financial gain of the licensee or of a third party, constitutes professional misconduct.[10]  This issue is mitigated if providers, willing and able to pay a patient’s premium, do so after patient has already selected a provider and a treatment plan is in place.  In cases where the provider is not advertising the payment of premiums to bolster business, third party payment of such premiums should not exert undue influence on the patient to receive medically necessary services that he or she has already opted for from that particular provider.  

Passage of such legislative ideas is necessary so that providers may render medical services to a greater scope of patients, including those who are enrollees of a QHP through the state health exchange.  Without such advocacy, the financial stability of providers and hospitals will be adversely affected by the ACA and patient may find that their options for providers is limited to those able to afford the risk of potential denial for reimbursement of claims.

[1] 45 C.F.R. 156.270(d)(1).

[2] Id.

[3] 45 C.F.R. 156.270(d)(3).                              

[4] S7501-2013.

[5] Id.

[6] Hearing of the New York State Senate Health and Insurance Committees, Testimony of Andrew Kleinman, MD, President-Elect, MSSNY (Jan. 7, 2013).

[7] Id.

[8] S7500-2013.

[9] 42 USC 1320a-7b(b).

[10] NY Educ. Law 6530(17): “Exercising undue influence on the patient, including the promotion of the sale of services, goods, appliances, or drugs in such manner as to exploit the patient for the financial gain of the licensee or of a third party.”

Share this article:

Related Publications

Get legal updates and news delivered to your inbox