CMA legal team weighs in on grace period provision

August 09, 2013

The California Medical Association’s (CMA) legal experts have officially weighed in on the Affordable Care Act’s (ACA) troubling “grace period” provision.

The ACA calls for a three-month “grace period” to be offered to all enrollees receiving subsidized coverage through the newly formed health benefit exchanges. During this grace period, exchange plans cannot terminate a consumer’s coverage for non-payment of premiums. They can, however, “pend and deny” physician claims for services provided to patients who are delinquent on their premiums.

Last week, Francisco Silva, CMA’s vice president and general counsel, submitted his interpretation of the grace period provision to the Centers of Medicare & Medicaid Services, writing that the provision conflicts with California’s payment laws and that states are “not preempted from requiring health plans to provide coverage throughout the entire three month grace period afforded by the ACA.”

For months, the issue of the 90-day grace period required by the ACA has proved vexing to state officials trying to launch California’s online insurance marketplace, while also making physicians leery of contracting with exchange products.

In early 2012, the U.S. Department of Health and Human Services (HHS) issued a rule clarifying how this provision would operate, noting that exchange plans would have the ability to pend claims for services provided after the first month of non-payment until the outstanding premium balance is paid. According to the HHS rule, providers weren’t required to be noticed that claims could be denied until they submitted a claim during the second or third month of the grace period. With these services already rendered, providers could be left on the hook for up to 60 days of unpaid claims.

In California, the inclusion of this grace period provision raised a unique red flag, as the state’s Knox-Keene Act and Insurance Code generally require payment of clean claims authorized by the payor and provided by the physician in good faith within 30 to 45 business days.

In authoring CMA’s interpretation, Silva writes that the grace period provision does not preclude California’s “robust provider payment laws,” and that forcing physicians to bear the risk of loss during the second and third months of the grace period is “counterproductive to the express stated intent of Congress in enacting [the] ACA.”

Silva’s letter comes only weeks after representatives from California’s Department of Managed Health Care (DMHC) informed Covered California staff and participating health plans that they could not see a scenario in which exchange plans could pend and deny claims under the federal grace period provision without running afoul of the Knox-Keene Act.

Covered California staff and its board have stated they are committed to reconciling any conflicting requirements to the greatest extent possible, and further federal guidance on the matter as a result of this recently submitted interpretation could ensure that plans will not be able to pend or deny claims when the exchange goes live in January 2014.


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