Labs Face Bad Debt Exposure from New Patients in ACA Plans

ACA’s 90-day grace period rule exposes physicians and clinical labs to risk of non-payment for services

LABS MAY BE AT RISK for the total cost of lab testing performed for patients who enroll in a subsidized insurance plan through the ACA’s health insurance exchanges (now called the marketplaces), but never pay their premiums during the 90-grace period.

The federal Centers for Medicare & Medicaid Services (CMS) allows individuals who buy subsidized coverage through the marketplaces a grace period of 90 days before their coverage is cancelled for non- payment. In a notice to its members, the American Medical Association warned that providers could have significant financial exposure each time they provide health care services to patients who are enrolled but not fully covered.

Labs should be aware that the last day for initial enrollment into a subsidized health plan in the marketplaces was March 31, 2014. Therefore, those patients have until the end of June to pay their premiums.

“Clinical labs typically use insurers’ online verification systems to verify patients’ enrollment in the health plan,” said Charles C. Dunham, IV, an attorney with Bond Schoeneck & King, in Albany, New York, “but these systems may not be updated in a timely fashion with information regarding premium payments.”

Dunham called attention to the fact that, because many patients are likely to have high-deductibles under the plans offered on the exchanges, this makes them responsible for the first $1,000 or more of healthcare services. “These high deductibles are the reason why patients may be responsible for the entire cost of laboratory testing,” he added.

Among the four ACA plan levels (bronze, silver, gold, and platinum), bronze plans cover only 60% of covered medical expenses for a typical patient. Silver plans cover 70%, gold plans 80%, and platinum plans 90%, according to a report by HealthPocket, a health plan rating service.

This year, the deductible for an individual in a bronze plan is $5,081, which is 42% higher than the average deductible of $3,589 last year, noted HealthPocket. It also said that the deductible for a family with a bronze plan is $10,386.

Labs Should Contact Payers

“Given that health plans participating in the marketplaces are required to continue enrollment for 90 days—even without payment of the premium—a lab will confirm the patient information with the health plan through the online verification program prior to performing the test if possible,” said Dunham. “But in addition, labs should call the health plan to verify that patients have paid their premiums if that information is not available online.”

“Making that call may be the only way to verify that the patient and the service in question are covered,” he cautioned. “After all, the health plans will place the onus on the providers to be sure that patients getting treatment have paid their premiums.”

In its notice to physicians, the AMA explained that, “Under the CMS rule, insurers in health exchanges are required to pay any claims incurred during the first 30-days of the grace period, but insurers are not required to pay claims incurred during the last 60 days for any patient whose coverage is terminated. Patients are considered to be covered for care during the entire grace period, but insurers are allowed to place all the claims during the last two-thirds of the period in a pending status and retroactively deny them when coverage is terminated at the end of the grace period.” (Italics by THE DARK REPORT.)

Key Point For Lab Managers

These statements apply to clinical laboratory testing services provided to a patient covered by health insurance purchased from a health insurance exchange. The key point for lab administrators is this: if the patient does not pay his or her health insurance premiums in full before the end of the grace period, the health insurer will not extend coverage for the second or third months of the grace period and will deny claims for services provided during that time. In this case, a patient is then responsible for paying the entire bill for services rendered during the second and third months.

Dunham pointed out that one important change every lab can make is, whenever possible, to determine the deductible payments and collect this amount upfront as a deposit. Collecting some money up front and making an agreement with the patient to pay some amount over time—whether those payments are made weekly or monthly—will help ensure that the lab gets paid. However, unlike most providers who see patients face to face, labs may not interact with their patients if the specimens were collected by a member of a physician’s office staff.

Clinical laboratories and anatomic pathology groups would be smart to put in place policies and procedures that can help them collect more money from patients who have enrolled in health plans offered through the health insurance exchanges. Some innovative labs are developing systems that allow staff at patient service centers to see billing information and collect payments from patients at time of service.

This is true not just because of the financial exposure triggered by ACA’s 90- day grace rule, but the simple fact that a growing proportion of patients now have very high deductible and copay requirements. It is smart business for all labs to get ahead of this specific trend.

AMA Recommends Steps Providers Should Take

WHEN PHYSICIANS ARE CONCERNED about providing healthcare services to patients and not being paid for those services, then it is likely that clinical laboratories are exposed to the same risk of nonpayment for lab tests they perform on these same patients.

The concern centers around the 90- day grace-period rule in the Affordable Care Act. In a recent statement about this issue, AMA President Ardis Dee Hoven, M.D., wrote, “The grace period rule imposes a risk for uncompensated care on physicians… Managing risk is typically a role for insurers, but the grace period rule transfers two-thirds of that risk from the insurers to physicians and health care providers. The AMA is helping physicians take proactive steps to minimize these risks.”

To minimize the financial damage that could be caused by any non-payments from health insurers as a result of cancellations of coverage, the AMA recommended physicians and providers take such steps as:

  • Collect a copayment from the patient at time of service.
  • Make agreements with patients to pay the balance of the deductible and copayment over time.


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