Financial Ramifications for Physician Practices of ACA Deductibles: Getting Paid for “Affordable Care”
Absent in the noisy political rhetoric for and against The Patient Protection and Affordable Care Act (ACA), popularly known as “Obamacare,” is analysis of the potential financial impact of the ACA’s significantly high deductibles upon physician practices. In a third-party payer system where consumers are inclined to think that if covered by insurance the doctor’s bill is paid by the insurer, adapting to high ACA deductibles may be painful for patients and treating doctors alike.
The New Day: Shifting Health Care Costs From Payer to Patient
Laudable objectives of the ACA include slowing the growth of health care costs, improving quality of health care and, perhaps the law’s hallmark feature, expanding health insurance to cover to everyone. Proponents of the ACA tout new “access” to health care by way of health insurance coverage for all, irrespective of pre-existing health conditions. This policy objective is advanced in part by the ACA’s play-or-pay mandates. So insurers are not left insure only high-cost patients, the ACA mandates that everyone (including, notably, the young and healthy) to obtain coverage and pay insurance premiums if not covered under an employer or government insurance plan. The alternative — a penalty tax to the government – is intended to incentivize a decision to pay insurance premiums. To avoid wide-spread abandonment by businesses of employer-sponsored health insurance based on the new costs of providing health insurance with “essential benefits” required by the ACA, employers with fifty or more employees that decide against offering ACA health insurance coverage must pay significant penalty taxes to the government.
Even with the government’s much publicized website problems, multiple delays in implementing certain ACA provisions and ongoing political wrangling about whether the ACA is good or bad, millions of Americans have already enrolled via the ACA’s Health Insurance Exchange in and are now covered by ACA health insurance plans. Millions more will. In an industry where medical practice models heavily depend upon third-party payer revenue, more insured patients should be all good for doctors — right?
The economic reality is that there is no free lunch for those insured under the ACA and this reality will impact physician practices. The significant new costs of insuring greater risks (pre-existing health conditions, no life time limits or annual caps, required essential benefits, etc.) of course must be passed on to consumers. One way insured individuals and families will shoulder the increased costs is by high deductibles. The ACA strongly advances an existing trend toward high deductible insurance plans. It authorizes deductibles of up to $6,350 for an individual and $12,700 for a family. The ACA’s online marketplace, www.healthcare.gov, presents bronze, silver, gold or platinum plan options, which, in addition to some differences in benefits, involves choice of higher premiums or higher deductibles. Due to the impression conveyed by the ACA that all plans now must include “essential” health benefits, many consumers are expected to shop based on premium alone. To avoid higher premiums, consumers are expected to gravitate toward the higher deductible bronze plans.
The average individual deductible for the lower-priced bronze plans is $5,081 a year for an individual, which is 42 percent higher than the average deductible for an individually purchased plan last year ($3,589). While limited preventive care is exempt from the ACA deductibles, most treatment is not. Absent very significant cumulative or big-ticket medical expense (rare for most patients), the typical patient insured by an ACA bronze plan will pay out-of-pocket most or all of his or her annual health care costs.
Doctors and their insured patients are accustomed to the usual mechanics of our third-party-payer system, involving presentation of an insurance card to the doctor’s receptionist, small co-pays, submission of a claim to an insurer and an insurer’s payment. Patients are not used to paying the full costs of their health care, especially if they write checks (or have deductions from their pay) for insurance premiums. And physician practices are set up to depend upon claim processing and payment by third party payers, with limited patient billing only after claims are processed by the insurer.
This model is not well suited to high deductible insurance plans, however. No one likes a surprise bill, especially for medical tests or procedures a patient thought the insurer might pay. Payment of an unexpected doctor bill received weeks after treatment has been obtained can easily be relegated in priority behind the more pressing car payment, cable bill, or cell phone bill, and may be delayed or avoided altogether as a result.
So what should physician practices do?
Get Paid Upfront
This strategy seems obvious for any business. However, payment up front is not as straightforward a proposition for physicians as it is for a plumber, grocery store, or lawyer, at least where insured patients are involved. Physicians are subject to provider agreements with third party payers that dictate what charges are “allowed,” irrespective of what the doctor may otherwise charge. As a matter of well-established routine in physician practices, insurer processing of claims reveals the “allowed” amounts for a health care provider’s charges. So, where deductibles are so high that the insurer’s role is mostly a moot point yet the provider agreement nonetheless binds the doctor to collect only what is “allowed,” how can the doctor determine and collect the proper amount from the patient at the time of service?
The allowed amounts are stated in the third party payer’s fee schedule. The payer’s fee schedule is part of its provider agreement with the doctor or medical practice and, if not attached to the contract, should be obtainable by a request to the payer. Because physicians are contractually bound to charge only an “allowed amount” stated in the fee schedule for a particular service, the allowed amount is what can be collected from the insured patient at the time services are rendered.
For many physician practices, important adjustments to office procedures can facilitate collecting full payment of the allowed amount for charges directly from high deductible patients at the time of service. Trusted office personnel may be delegated to obtain, save and carefully organize on an ongoing basis all payer fee schedules so that allowed amounts for anticipated services can be determined before services are rendered. Front-of-the-office intake functions could include a determination that a deductible has or has not been met, preferably before the patient arrives. If a deductible has not been met, requiring full payment of the allowed amount of all charges for the anticipated service will avoid the risk of delayed or no payment for the services rendered.
Part of the challenge for physician practices in trying to obtain full payment by insured patients at the time of service will involve training patient expectations. Physician practices will benefit from educating insured patients with high ACA deductibles in advance of their doctor’s appointment about the payment expectations of the doctor. Advance communication of payment responsibilities will allow patients to plan and make payment necessary arrangements, which will reduce the likelihood of unpleasant misunderstandings where high deductibles have not been met. Getting in front of payment issues that will stem from higher deductible health insurance plans in this way should help contain any increase in receivables or uncollectible patient accounts that might otherwise attend the new high deductible insurance plans.
Disclaimer: Thoughts shared here do not constitute legal advice.
 The number of Americans insured under high deductible plans rose from about 1 million in 2005 to 15.5 million in 2013. January 2013 Census Shows 15.5 Million People Covered by Health Savings Account/High-Deductible Health Plans, America’s Health Insurance Plans, June 2013.
 In some states, like Georgia, state law requires health plans to provide their fee schedules to physicians upon request. See O.C.G.A. § 33-30-23; Medical Association of Georgia v. Blue Cross & Blue Shield of Georgia, 244 Ga. App. 801, 536 S.E.2d 184 (Ga. App. 2000).
 Acceptable payment methods are cash and credit cards. New retail credit options designed specifically for health care expenditures (e.g., www.carecredit) are emerging and may afford patients greater credit options.
 There are many options that may, depending upon the circumstances of a medical practice, be useful in this process and warrant consideration, including post cards before appointments, printed brochures, an online payment portal, telephone calls before appointments and office signage at the front desk.