Another reason to think twice before joining an Exchange network …

By Scott Hultstrand, SCMA General Counsel

Many South Carolina physicians have already received a letter from Blue Cross/Blue Shield inviting them to participate in their physician network for the new health insurance exchange that the Federal government is creating in South Carolina.  The exchange is supposed to be up and running by October 1 to enroll its first patients, so Blue in South Carolina has been moving quickly to build out their exchange network.  Some physicians have already signed their contracts, accepting the Medicare rates that Blue offered.  For other physicians this is too much of a pay cut compared to their current commercial rates, although I have alerted many that Blue is building a narrow network.  This means that if you have a lot of competition in your area, you may not be able to hold out for better than Medicare reimbursement since one or two practices that accept that rate may end up completing their narrow network for your specialty. 

Of course, being excluded from a network that has very limited participation by patients won’t be a big deal, but that’s the big unknown – just how many South Carolina patients will be purchasing their insurance on the Exchange?  My guess (and it’s just a guess) is that South Carolina’s exchange will take a little while to build momentum in terms of volume, but that there could be specific regions for a variety of reasons that have more exchange participants (i.e., Sun City in Bluffton probably won’t get a lot of Exchange participants because of its significant Medicare population, but maybe Rock Hill metro with its growing young(ish) Charlotte commuter population could see bigger percentages).  Of course, this could all change if South Carolina businesses decide to drop coverage in mass numbers, which would drive Exchange volume much higher.

On to the topic at hand, though…which is another reason to be careful about the Exchanges.  In a recent regulation issued by CMS, the federal government decided that patients would be kicked off the Exchange if they fail to pay their premium for three straight months.  So how does this impact physicians?  If the patient refuses to pay for three straight months, then their insurance coverage will be revoked retroactively for the final two months that they didn’t pay.  This means the insurer has to pay claims for the first month of non-payment but allows the insurer to deny claims for the final two months.  This could be really bad for physicians.

Here’s why.  In an example given in the regulation, CMS hypothesizes that a patient does not pay premiums for March, April, and May.  Three months of non-payment so at the end of May their insurance is terminated effective March 31.  The patient has been seeing doctors in each of March, April, and May.  The insurer still has to pay for March.  But for April and May, according to CMS, the insurer is off the hook.  Who is on the hook for doctor visits in April and May?  Guess who?  Right, the physician. 

Here is the solution CMS proffers, and let me quote this one:  “Providers could then seek payment directly from the individual for any services provided during [April and May].”  We all know, however, the chances of providers seeing that payment is pretty remote.  And with physician ethical obligations to provide continued care coming into the mix, cutting off care in the last two months is going to be difficult, assuming the physician is able to determine that the patient has stopped paying their premiums (CMS does require insurers to notify physicians of patients that are not paying their premiums to warn them that they may get their claims revoked).

CMS realizes this will cause considerable issues for the physician community, and they admit it in this sentence in the regulation: “We understand that pended claims increase uncertainty for providers and increase the burden of uncompensated care.”  The reasons why they moved forward with this idea anyway…they feared higher insurance premiums to pay for the two months of care that the patient incurred when not paying the premium and the tax liability that patients might have to bear when figuring out how the tax subsidies would interact with nonpayment. 

This doesn’t mean you shouldn’t join the Exchange.  And hopefully this would be a relatively infrequent occasion where patients don’t pay their insurance premiums.  But we at the SCMA believe that any decision a physician makes as the Affordable Care Act progresses should be made with as much information as possible.  This is just one more thing to think about, and I’m guessing there will be others as this law develops!  That’s why you need to keep reading The Voice, where we hope to keep you abreast of health law and policy developments in the coming months and years.

To read more about this issue in a report featuring responses from the California Medical Association, click here.  Or click here  to read the regulation issued by CMS on this issue.