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“Grace Period” Coverage Under Exchange Plans: How Federal Regulations Can Alter Eligibility Determinations for Providers

By Matthew Horton, Washington & West, LLC

The Affordable Care Act (ACA, or commonly referred to as Obamacare) altered the landscape for individual and small group insurance plans. ACA altered this market with two important provisions: (1) the creation of Qualified Health Plans (QHPs, also referred to as Exchange Plans) and (2) establishing Exchanges (also called health care marketplaces), such as the Federal Exchange, Healthcare.gov. With the creation of QHPs under the ACA, there are a litany of new federal requirements health insurers must follow; one such requirement is the “grace period,” and providers should be aware if a patient is in the grace period because of the potential for denied claims.

Issue: With QHPs sold on the Exchange, there is a federally mandated three-month grace period where health insurers cannot cancel the policies of members who do not pay their premiums. During a portion of the grace period, the member will be eligible under the plan, but the health insurer may pend any claims submitted for healthcare services during this time until the member pays his or her premium. If the member’s premium remains unpaid, the health insurer may deny claims that were pended during the grace period. How are providers supposed to know when this grace period is in effect, and what can they do to avoid pended or denied claims?

Takeaways:

  1. Providers need to be aware of the required notice health insurers must provide when a member has not paid their premiums.
  2. Consider establishing a specific process for identifying QHPs during verification at the time of registration and creating system alerts for patients who are in a grace period.
  3. Consider specifically asking the health insurer if the patient is in a grace period.
  4. Once a patient is confirmed as in a grace period, take notes of the verification process and document any available reference numbers, tracking numbers, etc.
  5. Determine the manner in which QHP insurers provide notice of potential nonpayment of pended claims. It could range from a reason code on your remittance to calling the provider services line of the plan when determining eligibility.
  6. Paying the premium for patients who are in the grace period to ensure claims will be paid would seem to be one solution. However, there are multiple legal and compliance issues that must be considered and appropriately addressed. Consultation with an experienced in-house counsel or attorney will be necessary.

Discussion:

The ACA has led to multiple new federal requirements health insurers must follow in the individual and small group health insurance marketplace. One such requirement applicable to health plans is the three-month “grace period.” This federal requirement is not applicable to all QHPs or Exchange plans. In general, if the patient you are treating meets the following, then the grace period provision likely applies:

  1. Enrolled in a QHP through an Exchange;
  2. Receives an advance payment of the premium tax credit; and,
  3. Pays at least one full month’s premium during the benefit year.

The grace period requires QHP insurers to provide three consecutive months coverage, even though their member (your patient) is not paying premiums, prior to terminating the member’s coverage. The crux of the issue lies in determining responsibility for payment of the member’s health care services during the three-month grace period. Federal regulations requires QHP insurers to pay claims during the first month of the three-month grace period. During the second and third month, however, the QHP insurer may pend claims until the member has paid his or her premium. If no premium payments are made, then the insurer can retroactively terminate the member’s coverage and deny the claims that were in pended status. It is also a possibility that QHP insurers could pay claims and later retract if the overdue premiums are not paid, so long as the required notice to providers was met.

For providers, a patient, the QHP member, may appear to be eligible and covered for health care services during this grace period, but there exists substantial risk of denied claims if the patient falls within the grace period. The two examples below provide simple scenarios where the grace period applies.

Example 1:

John Doe enrolls in a QHP through an Exchange in January and receives advance payment of premium tax credits. He paid his first month’s premium for the month of January but stops paying his premiums. John comes to you for healthcare services to be performed in February. Patient Access verifies his coverage and that he has not yet paid his February payment, but that January was paid.

In this example, John qualifies for the three-month grace period since he enrolled in a QHP through an Exchange and receives an advance payment of the premium tax credit. John paid his first month’s premium but did not pay February. The month of February begins the three-month grace period. You, as the provider, will be rendering healthcare services during the first month of the three-month grace period. The regulation states QHP insurers must pay for these services rendered during the first month of the grace period, even if the premium for February is never paid.

Example 2:

Same facts as Example 1, except John comes to you for healthcare services performed in March (the second month of the grace period).

Since John has still not paid his premiums, he is now in the second month of the grace period during the month of March. The QHP insurer may pend the claim until premium payments are received. If John does not pay the outstanding balance to the QHP insurer by the end of April, the QHP insurer can retroactively terminate John’s policy. Further, your claim for healthcare services provided to John during the month of March will most likely be removed from pended status and processed as a denial.

Notice Requirement

Within the federal regulations, there is a notice requirement QHP insurers must provide to providers when there is a possibility for denied claims during the second and third months of the grace period. However, the regulations are silent on how QHP insurers must provide notice to healthcare providers. It could vary from reason codes on a remittance advice post-service, to being notified verbally during eligibility determinations. It is important for providers to determine how their payors plan to comply with the federal notice requirement because the regulations do not state the manner of the required notice. Since the notice requirement is a new and developing issue, some payors may provide notice only post-service on the remittance advice.

There are arguments available to overcome notice only provided on the remittance advice, but the important concern for providers is to know how payors are planning to comply with the notice requirement.

Some plans, such as UnitedHealthcare, have published guidance on the notice requirement for providers.[1] Once a provider knows a payor will be handling the notice requirement in a certain manner, they can then work to establish processes to avoid unnecessary claim denials.

Conclusion:

With the increasing enrollment numbers of QHPs, providers can expect to treat more patients that are subject to the grace period provisions. Additionally, it is unclear how the grace period provision is interpreted with other federal provisions, such as redeterminations and reenrollments in QHPs. With this in mind, providers can expect a difficult environment for determining coverage for patients with QHPs who fall within the grace period provision and should be aware of the required notice QHP insurers must provide during the grace period when claims potentially could be denied.

Additionally, for patients falling within the grace period, providers may be considering paying the premiums to avoid pended and, ultimately, denied claims. However, the legal intricacies of the fraud and abuse laws and tax laws requires consultation with experienced attorneys, in-house counsel, and hospital executives. Following articles will touch on these legal and compliance issues of third-party payment of premiums by providers.

Do you have questions regarding the topics covered in this article?

Contact the author, Matthew Horton, at 410-296-1552, ext. 169, or fill out the contact form available under the “contact us” tab.

[1] UnitedHealthcare, Health Insurance Exchanges: Three-Month Grace Period

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