Physicians Face Unexpected Obamacare Loophole

Doctors who contract with state health insurance exchanges next year might find themselves on the hook for treatment costs resulting from what many are calling a loophole in the Affordable Care Act.

Some say the provision might prompt doctors to avoid the exchanges altogether, while other experts say few health care providers are aware of the issue and likely won’t know about the loophole until it’s too late.

Provision Permits Care Without Coverage

Under the ACA, if families who obtain subsidized health plan coverage through the exchanges fail to pay their premiums, they have a three-month grace period before the policy is cancelled. However, insurers are responsible only for paying claims during the first month of that grace period.

During the other two months, families are asked to pay their doctor’s bill or their insurance premium if they seek health care services. However, if they do not pay either bill, physicians are left to cover the cost of the treatment.

Such families would face a tax penalty for missing payments, but they would not receive a fine, a premium rate increase or a repayment order. They also would not be barred from purchasing another subsidized plan during the next enrollment period.

A ‘Laudable’ Design With Flaws

“I believe this part of the law was designed for logical and laudable reasons,” Lisa Folberg — vice president of medical and regulatory policy at the California Medical Association — said.

She explained that the three-month grace period was meant to ensure continuity of care for low-income families who might be between jobs and cannot afford to pay their premiums for a few weeks.

However, she said, “It is not the job of a physician to manage risk. It’s the job of the health plan — that’s its entire reason for existing,” adding, “Here we have case where doctors have to manage risk. That’s where the ACA went wrong.”

Concerns With Loophole

Observers say that while some families might be unable to pay their premiums because of situations such as job loss or divorce, others might avoid paying to take advantage of the loophole.

Meanwhile, physician advocates worry that the provision might prompt many doctors to avoid participating in the exchanges.

“This could potentially be a huge factor for physicians who are deciding whether they want to contract with Covered California,” the Golden State’s health insurance exchange, Folberg said. “They’ll want answers from participating health plans before making their decision.”

If they know about the loophole at all.

According to Folberg, many physicians have “no idea” about the provision and its implications. She said, “When I tell them, they are shocked.”

However, those who do know about the provision might be unable to avoid treating exchange patients. Folberg said that some physicians hold contracts with large health insurers — such as Anthem Blue Cross — that include an “all-products” clause, which requires that doctors treat any patients covered under the health plan.

Even physicians who are not required to treat patients through such contracts likely would continue providing care for patients, even after health plans provide 15 days’ notice that payments will stop for the last two months of the grace period.

Folberg said, “Doctors have legal and ethical obligations not to abandon their patients during course of treatment. A physician isn’t going to stop a round of chemotherapy, and those drugs can cost tens of thousands of dollars or more.”

Paul Phinney — president of CMA — said the loophole “could be very problematic, even to the extent that it may cause some physicians to have to close their practice.”

Leah Newkirk of the California Academy of Family Physicians said the financial implications of the grace period are especially acute for small or struggling practices. Newkirk said, “I think in particular it will impact providers in rural areas and providers who are seeing disadvantaged populations, sort of precisely the people we want to encourage to (buy policies).”

In response to the criticisms by California physician groups, Diana Dooley — secretary of the state Health and Human Services Agency and Covered California trustee — said that state officials have discussed such concerns with the federal government but that federal law provides no flexibility on the issue.

Assessment or Action?

In a notice published in the Federal Register, HHS acknowledged that nonpayment of premiums for certain subsidized policies would “increase uncertainty for providers and increase the burden of uncompensated care.” HHS officials said that the agency will “monitor this issue moving forward and will continue to work on the development of policies to prevent misuse of the grace period.”

However, Folberg said action — on a large or small scale — is needed.

She said that exchange officials could do more to increase the administrative burdens on health plans. For example, health plans could be required to notify patients, along with physicians, of the impending loss of coverage. Health plans might start rebuking the ACA provision because of the extra work, she said.

However, Folberg observed, the surest way to solve the issue is with the help of Congress. If word of the loophole spreads, more physicians can lobby U.S. lawmakers for a change, she said. “This is a federal issue, and the only way to fix it is by changing federal law.”

Matthew Wayt is an associate editor at California Healthline, where this piece originally appeared.

17 replies »

  1. How about the loophole where insurance companies are cancelling individual policies citing Obamacare, with total disregard for the patient who has just met their out of pocket maximum mid policy year. This just happened to my mom. Even if she re-enrolls with the same company, the deductible and out of pocket max contribution resets to zero.

  2. Why is this any different than when patients policies terminate and doctors find out after treatment?? You bill the patient they don’t pay and you turn them to collections!!

  3. If “the Law” was all that mattered, there will be no subsidies in federally established exchanges.

  4. Weak. Nit pick on semantic evasions, go right ahead. How about “the Law,” which is all that matters, and is not 2,000 nor 2,700 pages long.

  5. MHH said bill. You say 906 which is the Act. Please stick to accuracy when championing accuracy.

  6. The “so what?” goes to accuracy. It matters to me, even if it doesn’t to you.

  7. “However, Folberg observed, the surest way to solve the issue is with the help of Congress. If word of the loophole spreads, more physicians can lobby U.S. lawmakers for a change, she said. “This is a federal issue, and the only way to fix it is by changing federal law.” ”

    Maybe, if we lived in a country of laws and a majority of folks interested in following those laws. The Act plainly states subsidies are only available in state established exchanges. This is not a glitch, or an oversight, or a scrivener’s error. The Act was written and passed with the incentive to the states to set up exchanges being the subsidy. Administration and democrat legislators assumed all states would jump at the subsidies and wrote the law that way. They were wrong. Now the IRS is “overreaching” and attempting to unconstitutionally write new law and levying taxes not authorized by the congress and violating the Act and attempting to collect an additional $600,000,000,000 in taxes (or penalties or whatever) in states not establishing exchanges. Folberg is technically correct in that the only way to fix this (legitimately) is by changing the law. I doubt obama, irs, and hhs are interested in what is constitutional or legitimate at this point.

  8. Please give it a rest. Yes, bills were over 2000 pages. Yes Act as passed was 906. Yes, there are over 30,000 pages of regulations already. So what?

  9. I don’t think we should underestimate the number of people who are willing to game the system if they think they can get away with it.

    Anyone who fails to pay their premium for three months should either (1) not be able to buy another insurance policy until the next open enrollment period or (2) not be able to buy another plan until the premiums on the prior plan are brought up to date and/or the providers are paid sufficiently for any services rendered to at least reimburse them for their costs. If there are legitimate circumstances that led to defaulting on the premium for three months, perhaps a church or charity could step in to prevent loss of coverage.

  10. People are always assuming the worst. Who are the people that will take advantage of the loopholes? 9/10 it’s poor desperate people that have no other way to turn.

  11. Could a restaurant pay the customers bill so that the customer can keep coming back for free?

    Could an auto insurance company pay the customers premium so the customer can keep driving without paying for insurance?

    What a wonderful concept! Can someone fax me some paper since I am out?

  12. So docs could get f#*2ked by the ACA?

    Shocking, who would have thunk it?

    Say it ain’s so Joe!

  13. When something doesn’t pass the common sense smell test, there’s a hidden agenda. And you can bet that any bill w/ 2000+ pages has a lot of hidden agenda in it.. I’m not saying that the healthcare we have today works, it doesn’t. But the ACA is a bad dream getting ready to come to life.

  14. Could the physician, if notified, pay the premium? Similar to a hospital paying COBRA premiums to keep coverage in effect.

  15. Great. Another loophole. How many of these things are out there waiting to be discovered?