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Healthcare Industry Challenges for Providers, Patients and Insurance Companies

November 05, 2015
FROM:     ACA International*
RE:         Healthcare Industry Challenges for Providers, Patients and Insurance Companies

There are many influences on the healthcare industry today for providers and their collection agency partners, including the Affordable Care Act and the Internal Revenue Service’s 501(r) requirements for hospitals exempt from taxation as described under 501(c) (3).

Lyman Sornberger, the chief healthcare strategy officer for Capio Partners LLC, presented a detailed overview of the Affordable Care Act and 501(r) and the impact on healthcare collections professionals and providers at ACA’s 2015 Convention & Expo in Boston.

For healthcare providers, especially those with tightening budgets, it is important to focus on these changes to mitigate financial exposure.

Affordable Care Act

The Affordable Care Act has improved access to care for consumers and the uninsured rate in the U.S. continues to decline, but the requirements of the law also present challenges for providers. 

States that have adopted multiple portions of the Affordable Care Act continue to experience more improvement in their uninsured rates, according to new data from the Gallup-Healthways Well- Being Index released in August.

Across the U.S., the uninsured rate declined from 17.3 percent in 2013 to 11.7 percent in the first six months of this year, according to Gallup.

“In terms of statistics, it looks like it’s moving in the right direction; but in terms of the patients and collections and providers, the fact of the matter is the providers have a huge challenge,” Sornberger said.

One of the challenges for the industry is a result of increased premiums for consumers who selected high-deductible plans they cannot afford, according to Sornberger.

“More and more people are insured, but more and more people are underinsured. They have coverage, but owe so much in out-of-pocket expenses,” Sornberger said.

Thirty-one million people, or 23 percent, with health coverage in the U.S. were underinsured in 2014, according to a report released by The Commonwealth Fund in May. The share of working-age adults who had health insurance all year but were underinsured was statistically unchanged since 2010, after nearly doubling from 12 percent to 22 percent between 2003 and 2010. People are considered underinsured if they have had health insurance for a full year but have high deductibles or out-of-pocket expenses relative to their income, according to The Commonwealth Fund. “

Just being insured doesn’t mean that there is no challenge for the patient or the provider,” Sornberger said.

Those consumers, who could also be uninsured, often pay out-of-pocket for a portion of or all of their healthcare costs.

In 2014, 65 percent of people enrolled in healthcare selected a Silver Plan, which has 40 percent out-of-pocket costs; 20 percent selected a Bronze with 30 percent out-of-pocket costs, according to Sornberger.

He added that, as of this year, an estimated two million people did not pay their premium.

“The industry is challenged now because now they’re starting not to pay the premium,” Sornberger said.

As a result, some insurance companies are denying a patient’s coverage on the day they stop paying their premium.

“And what does the provider do?

They start passing it on to the patient,” Sornberger said. “One of your challenges as leaders in the industry is to understand what the community is doing. How are payers reacting?”

Providers at nonprofit hospitals face an added challenge related to collecting money from patients under the Internal Revenue Service’s 501(r) requirements that are required to be in effect by Dec. 29, 2015.

The industry supports, on average, 70 percent of patients who have insurance have either a higher deductible plan. On a federal exchange, it’s not a high deductible; but their out-of-pocket is higher.

The combination of the two is basically saying more and more people are insured, but 70 percent of them have a higher responsibility.

501 (r) Requirements

Hospitals subject to 501(r) must complete a community health needs assessment, meet financial assistance policy requirements, adhere to limitations on charges and follow billing and collection practices.

The IRS made its final ruling on 501(r) in January with a mandate for non-profit hospitals to adopt the requirements by Dec. 29, 2015.

The final regulations require hospitals to wait 120 days before initiating extraordinary collection actions (i.e. selling debt or reporting adverse information to a credit bureau) against patients whose eligibility under financial assistance policies is undetermined. There is also a 240-day waiting period during which a hospital facility is required to process any application submitted by the individual.

A hospital’s financial assistance policy must specify the eligibility criteria for financial assistance and if it includes free or discounted care, and the basis fordetermining amounts charged to patients.

Sornberger provided some reminders for providers and collection agencies to consider in the months before the requirements are final.

  1. While a plain language summary of a bill is not required with each statement, it is required to be sent at least 30 days before initiating an extraordinary collection action.
     
  2. Sornberger recommends the plain language summary should accompany the written notice that indicates financial assistance is available for eligible individuals, identifies extraordinary collection actions the hospital intends to initiate and states a deadline of when those actions may be initiated. It can never hurt to provide the notice on day one to promote early payment and enhance the patient experience.
     
  3. Providers may see charity care decrease as individuals move to high- deductible plans in the short term. If a provider’s financial assistance policy doesn’t cover this and you have significant uncollected amounts, it could cause an increase in bad debt and decrease in charity care.
     
  4. A provider may refer an individual’s debt to a debt collection agency or other party to collect amounts owed by the individual to the hospital while still maintaining ownership of the debt, and if adverse information isn’t reported to consumer credit reporting agencies or credit bureaus.
     
  5. Providers can also set a patient up on a temporary payment plan pending approval of their financial assistance as long as any excess payments are refunded when their eligibility for assistance is determined.

Overall, Sornberger stressed during his presentation that communicating about financial assistance options and billing and collection practices to patients should be a joint effort between healthcare providers and their third-party collection agency partners.

Sornberger also presented an overview of the impact of ICD-10, the updated medical diagnoses coding system that took effect on Oct. 1 as well as value- based care.

Sornberger said the Centers for Medicare and Medicaid Services’ testing of the ICD-10 system reflected a positive outcome, but commercial payers demonstrated challenges.

He said claim denials could increase if providers do not select the correct family of codes for a diagnosis under ICD-10, or providers could see lower payments on their claims. If that happens, Sornberger said there is the risk of those costs being passed on to patients.

With the updated system now in effect, ACA International will be talking with healthcare collection agency members and providers about the process and its impact on their work.

“What I’m fearful of is providers will move liability to [the] patient because they can’t respond to it,” Sornberger said.

More information on ICD-10 is available at: http://www.roadto10.org

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*© 201 ACA International.  All rights reserved.  Reprinted from pulse with permission from ACA.  This information is provided by and solely owned by ACA International (“ACA”).  ACA provides this guidance as a courtesy to be used for informational purposes only.  ACA requires us to inform you that it disclaims any warranties and makes no representation that the information is accurate, complete or current for any specific or particular purpose or application.  This content is not intended to serve as legal or other advice and should not replace the advice of your own legal counsel.  You may obtain additional information at acainternational.org

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