Hospitals should pay the premiums for patients who fall behind

It's little surprise that David Sedaris, whose acid observations about how Americans inflict themselves on one another are the best put to paper since Ambrose Bierce, left this country years ago. His time in Europe made a great little essay on healthcare that leads off his latest collection. It turns out that the doctors in France charge about $50 for an office visit (or a house call!) and don't run endless test panels to figure out why someone has a fatty tumor.

It's an approach that left Sedaris non-plussed--like every other American, he wants a definitive, technology-driven answer about his health. However, his wallet remained intact.

It was therefore heartening to see in a healthcare system where the bottom line predominates over all else and the background noise is all acrimony all the time, a glint of generosity. In one of the most impactful health finance decisions made this year, Health and Human Services Secretary Kathleen Sebelius last month quietly issued an opinion that hospitals paying for the premiums of health plans purchased on the state health insurance exchanges would not violate anti-kickback laws.

This is a huge development for patients, and a pretty good one for hospitals as well. Although the Affordable Care Act is making insurance affordable for many middle-income Americans and obtainable to those barred from purchasing it in the past, the out-of-pocket costs remain high. Indeed, a recent study by Avalere Health suggested that many enrollees with chronic illnesses could still be underinsured even if they purchase insurance through the exchanges, given the out-of-pocket costs they would have to cover. And chronically ill enrollees would be far more likely to be regularly hospitalized than healthier individuals, particularly if they can't pay for regular medications or treatments required to control their conditions.

Under the Affordable Care Act, insurers have to provide a 90-day grace period to policyholders who purchased their coverage through a state health insurance exchange. But they are only required to pay claims incurred during the first 30 days of that period. Patients trying to scrape up a couple of months of premiums if they fall behind--particularly if they become ill, miss work and perhaps are already struggling to pay other medical bills--could fall into a desperate hole pretty quickly.

The hospital associations in New York and Indiana have already hinted their constituents plan to pick up the premiums if needed. It makes perfect sense as a business proposition: A few hundred dollars paid on behalf of a patient to reap thousands or even tens of thousands of dollars in claims payments. They will also provide a community benefit somewhat more substantial than staffing the blood pressure booth at the annual health fair.

Yet, despite guarantees they will receive their premiums in a timely manner, the insurance sector is unhappy about this development. "There are concerns that this will have a very negative impact on the risk pool," Leslie Moran, spokeswoman for the New York Health Plan Association, said recently in an interview with Capital New York.

And less than a week after Sebelius released her decision, the HHS posted a Q&A on its website on this topic. It included the following sentence: "HHS has significant concerns with this practice because it could skew the insurance risk pool and create an unlevel field in the Marketplaces."

 If hospitals pay the premiums of patients who fall behind on their bills because they became seriously ill or injured, it poses no damage to the risk pool. It is a merely a continuation of the current risk. It just rankles the insurance executives they would actually have to pay the claims for patients who get sick or injured. They keep an eye out for this problem much the way a hiker does for poison ivy. Patients who can't pay their premiums because they're stuck in the hospital and unable to work are dream customers: The insurer gets to keep their premiums and leave them to actually pay the bills.

And lest Karen Ignagni of America's Health Insurance Plans and company complain I paint them in an unfair light, need I bring up the post-claims underwriting that many subsidiaries of Anthem undertook to cancel individual policies once a customer became seriously ill? How about Health Net paying bonuses to employees who canceled the policies of customers who became sick?

In short, the debate over whether hospitals should pay the premiums of patients who have fallen behind has created a definitive (if not technologically-driven) answer: By all means, do. The insurance companies should continue to collect the premiums for the services they legally contracted to provide without complaint, rather than try and wriggle out of it because they may lose a half-penny a share on their next earnings report. Anthem, by the way, is on track to net $3 billion in profit this year, up nearly 9 percent from 2012. Health Net may only earn $200 million this year in net income, but after all, they're only one-seventeenth the size of Anthem.

In other words, if the hospitals are willing to open their wallets a little, your industry should as well. And if you closed your mouths while you're at it, no one would complain. - Ron (@FierceHealth)