The COVID-19 pandemic has had an enormous yet uneven impact on the health care industry. Certain providers have been overwhelmed with patients, while others have seen their activity grind to a near halt. The widespread cancelation of elective procedures in hospitals and doctors’ offices around the country has, as some evidence suggests, allowed health insurance companies to save money, as the cost of those procedures far outweighs the added costs of COVID-19 care. At the same time, insurers are losing millions of customers that have lost their jobs and their employer-sponsored insurance (ESI).
However, a more obscure regulatory issue - one that has flown under the radar since it was rolled out a few weeks ago - could portend a financial disaster for the health care system in the months to come.
“[A new Trump administration] rule would let displaced workers sign up for COBRA coverage through their previous employer and access the benefits of coverage throughout the duration of the coronavirus pandemic — even if they don’t pay premiums. Their coverage could last for 90 days after the president lifts the national emergency designation. Once that period ends, individuals are supposed to pay all outstanding premiums, but it’s not clear if there are any repercussions for not doing so. Many people, especially those who received no healthcare services during the pandemic, will be reluctant to pay this hefty bill, which could amount to thousands or even tens of thousands of dollars. Even those who want to pay could be hard-pressed to do so after months of scraping by.”
While NTU acknowledges the need for policymakers to assist people who are losing their jobs and their ESI during this crisis, we don’t think that the way to do it is through a regulation issued with no public input. Allowing people a long period of time to elect COBRA and pay premiums - even on a retroactive basis - significantly risks kicking payment disputes from beneficiaries to struggling employers and health insurers. If employers bear a significant portion of these costs, businesses struggling to survive could go under. If insurers bear a significant portion of the costs, they could be forced to either raise premiums or reduce benefits in subsequent years.
There’s an added wrinkle to this process, as Axios recently reported: hospitals and other health care providers can also pay a patient’s COBRA premiums. Emphasis theirs:
“It's legal for providers to pay for someone's COBRA premiums, and employers and insurance companies have to accept those payments. That means providers now have a lot of time to enroll and directly subsidize people who are losing their jobs, and providers have a financial incentive to do so because commercially insured patients are by far the most lucrative.”
While this may sound like a convenient fix to an expensive problem - how to help patients access COBRA - this wrinkle is akin to letting one team in a football game unilaterally decide the rules.
If a doctor or a hospital employee cares for a patient who is uninsured, they face the possibility of either 1) never getting compensated for services provided or 2) getting reimbursed at government rates that are less favorable than what they would receive from a private insurer. If that patient recently lost their employer-sponsored insurance (ESI), though, even if that patient is past the typical window of eligibility for electing COBRA coverage, their provider can sign them up for COBRA in order to receive a more generous private insurance reimbursement.
Jennifer Carson, Senior Legal Editor at Business and Legal Resources (BLR), explained this dynamic in a 2018 post:
“The benefit provider will sometimes agree to pay for a qualified beneficiary’s COBRA coverage because, without that coverage, it might have to provide services with no realistic prospect of being paid. After all, it is easier to collect payment from group health plans than from most patients. Thus, given the choice between paying a COBRA premium of several hundred dollars per month or rendering uncompensated care costing several thousand dollars per month, a benefit provider would likely pay the COBRA premiums.”
While this ‘third party payer’ dynamic was clearly an issue before COVID-19, two problems make this a potential crisis for health insurers and self-insured employers in the coming months: 1) more people are simultaneously eligible for COBRA coverage now than at any point in its 35-year history; 2) the Trump administration’s new regulation could add fuel to the fire, and create a number of questions and conflicts when hospitals or providers try to pay for someone’s COBRA coverage. For example, if an uninsured patient who lost their job and ESI in March receives care in June, will the provider enrolling the patient in COBRA agree to pay March, April, May, and June premiums? What recourse does an employer or insurer have if the provider only pays the June premium (the month in which care was delivered), and not premiums for prior or subsequent months? What if an insurer refuses to pay out claims because they have not collected all COBRA premiums that are due? The administration’s regulation does not appear to address these questions.
Unlike many other debates in the health policy field - COBRA subsidies, ACA and Medicare/Medicaid expansion, coverage for the uninsured, relief for providers, and more - this issue has not yet caught the attention of most policymakers. Members of Congress have an interest in ensuring that people have options to obtain health coverage during the pandemic. However, they also need to ensure that the insurers and employers that provide health coverage aren’t crushed under the weight of a government mandate designed without public input.