CMS Digs Into the Problem of Third-Party Premium Payments

In a week when Aetna vowed to leave the Marketplace in 11 states, CMS on Thursday said it would look into a problem as old as the exchanges themselves: what to do about patients who get private help to stay in commercial plans instead of moving into Medicaid or Medicare?

In a statement, CMS said it would examine the “inappropriate steering” of patients who meet age or income tests for public healthcare programs—which pay lower reimbursements rates—but have received financial help to enroll in an individual plan, including those on exchanges under the Affordable Care Act.

According to CMS’ statement, the request for information is due to concerns that beneficiaries could be taken out of public plans, thus seeing disruptions in coverage or care coordination. Those eligible for Medicare could face penalties for failing to enroll.

But the broader concern, especially after this week, is the effect on the health of the individual market: older and poorer patients are likely to use more healthcare, driving up costs for insurers. Aetna, United Healthcare—which previously scaled back its ACA footprint—and the many Blue Cross Blue Shield affiliates have all said the Marketplace enrollees are sicker than expected.

What’s the problem with third-party payments? For a hospital with a very sick, very poor patient, it would make more sense for the bottom line to pay that patient’s premium and keep him in a private plan—with higher reimbursements—than to see that person switch into Medicaid, where reimbursements are far lower. In some cases, premiums might not come from the hospital directly but from an affiliated foundation.

Concerns about third-party premium support are not new. CMS issued a memo on the topic back in November 2013, in the midst of the first open enrollment on the exchanges. HHS discouraged the practice because of its potential effects on the risk pool, but said the decision to accept payments was ultimately up to the health plans. After some reaction from hospital groups, HHS drew a bright line between premium assistance based on income and that based on health status—in other words, helping all patients who were poor whether they were sick or healthy was one thing, but only paying for those who were sick was not a good idea.

An advisory issued in 2015 from BCBS of North Carolina is typical of the efforts to educate the public: “HHS advises that assistance in paying premiums must be based on financial need or geographic location rather than health status; premium assistance must be guaranteed for an entire calendar year; and people receiving premium assistance should not be limited in their choice of insurers or insurance plans.”

In its statement, CMS said it would gather public comment for possible regulatory steps. “These actions reflect ongoing efforts by the CMS Center for Program Integrity to address possible issues in the Marketplace that could affect the integrity of the programs for both consumers and issuers, and the costs of the individual insurance market, while at the same time help ensure patients are enrolled in the right plan for them,” the statement said.

The notice makes it clear that CMS seeks to improve the risk pool: “Like reducing inappropriate use of special enrollment periods and other efforts, (these) steps are a part of the administration’s ongoing work to strengthen and expand the Health Insurance Marketplace.”