CDHP’s ARE GAINING POPULARITY – IS YOUR FRONT END READY?
Lately, you cannot pick up an industry publication without seeing an article or comment on Consumer Driven Health Plans (CDHP) and the impact that heightened consumer choice will have on the health care industry as a whole. From a revenue cycle standpoint, CDHPs mean increasing self-pay populations, and correspondingly increased bad debt, due to higher deductibles and out-of-pocket expenses.
The current lack of rules and/or regulations providing for the consistent administration of CDHPs requires providers, particularly the front-end staff, to be ready to ask insurers some very specific questions in order to understand the patient’s financial responsibility for the pending services. A failure to do so will likely result in lost opportunities to collect at the time-of-service and inevitably increase the administrative burden on providers’ insurance follow-up staff.
THE NUTS AND BOLTS OF CDHPs
Fundamentally, the front-end staff should understand what CDHPs are and how they work. Simply stated, a consumer-driven health plan is one in which a high-deductible health plan (HDHP) is paired with a tax-advantaged savings account. Today, health savings accounts (HSAs), similar to 401Ks, are emerging as the most popular savings vehicle.
An HSA is a fund in which individuals can contribute tax-free dollars for future medical expenses and earn interest on the contributions. The individual owns the money, including employer contributions. The unused funds roll over from year-to-year. In 2006, individuals can contribute up to the amount of the deductible, but not more than $2,700 for self-only coverage and up to the amount of deductible, but not more than $5,450 for family coverage. With cash within reach, providers must make sure they are aware of the payment opportunity and grab it.
INSURANCE VERIFICATION -- MORE CRITICAL NOW THAN EVER BEFORE
When verifying insurance benefits before admitting a patient, alarms should resonate for the provider representative when they are told that the patient’s deductible exceeds $1,050 for self-only coverage or $2,100 if it is family coverage. The representative in this instance is presented with an HDHP, and as such it is imperative to request a copy of the patient’s ID card. While insurers are not yet required to place a logo or some other designation on the identification card indicating that the patient has an HSA, some insurers do. An HSA insignia may appear on the front of the card or, if dealing with a Blues Plan, information may be contained in the Comments section on the back of the card.
Once it is determined that the patient is covered by an HDHP and has an HSA, there are three very important questions the provider representative should be prepared to ask the insurer when verifying benefits:
Is the patient’s policy an individual policy or a group policy? – If it is a group policy, the employer may be making financial contributions to the individual’s HSA. If the employer is contributing to the HSA, it is likely that there is a reasonable amount of funds for the individual to access should it be necessary.
Is the particular diagnosis, procedure and/or service for which the patient is being admitted covered under the plan? – The purpose of high-deductible health plans is to make health insurance more affordable. In addition to raising the deductible and out-of-pocket expenses as a means of bringing down the monthly premiums, some insurers are also scaling back on benefits. Maternity benefits are a prime example of this. Some insurers are not including maternity benefits in their schedule of benefits for an HDHP. The benefits can be purchased separately. Other insurers are offering maternity benefits but have instituted a significant waiting period before the benefits become effective.
Is there a hospital indemnity rider in effect? – For some HDHPs, particularly those with a deductible in excess of $2,000, insurers are offering riders as an optional benefit as protection against major hospitalization expenses during the early months of coverage while cash accumulates in the HSA. As an example, Golden Rule Insurance Company offers this optional benefit which provides a one-time lump sum payment on the third-day of hospital confinement.
Understanding what the insurer will and will not cover and what the expected patient responsibility will be, aid both in collecting the patient portion at the time-of-service and in working the insurance claim on the back end. As with all insurance verification calls, detailed questions and proper documentation will greatly protect the provider’s interests later
COLLECTING AT THE TIME OF SERVICE
In theory, providers should cheer the creation of HSAs. After all, it is a savings account where the individual can withdraw funds, on a tax-free basis, exclusively for the reimbursement of qualified medical expenses, including hospital services, out-of-pocket expenses, premiums for continuation of health insurance coverage under COBRA, and premiums for health insurance coverage while the individual is receiving state or federal unemployment benefits. Furthermore, funds can be withdrawn to cover the qualified medical expenses of the spouse or dependent(s) of the individual. However, there are potential obstacles to obtaining reimbursement directly from the funds of such accounts.
Most administrators of HSAs are providing their members with debit cards in order to access their funds. If a provider is unable to accept Visa or MasterCard debit cards as a form of payment, some debit cards, although not all, can be used at ATM machines to access cash. Despite having the MasterCard or Visa logo on the card, the individual can only access the amount of money available in the account. The bank card is not a credit card.
There may be changes on the horizon, however. Beginning in early 2006, Empire Blue Cross Blue Shield is partnering with American Express to offer a new healthcare payment solution. Eligible members may apply for an optional HealthPay Plus credit line which would allow them to use funds to pay deductibles and other expenses before their HSA is fully funded or to help cover costs that may exceed the balance in their HSA. Empire Blue Cross Blue Shield Press Release, 11/30/05.
But is collecting the patient portion really that easy? Unfortunately, it is not. While more Americans may be saving money for their health care costs, it does not necessarily follow that they are spending that money on their outstanding health care bills. A review of the brochures for the CDHP products being offered by several nationally recognized health plans found that the Plan materials specifically mention that individuals have the option of saving the funds in the HSA and paying for their out-of-pocket costs by some other means. What happens if the patient decides to not use the funds available in their HSA? Can a provider compel an individual to release those funds in order to get their bills paid? For collections at the time-of-service, the answer is “No.” Currently, there is no federal or state law which mandates that an individual pay for their out-of-pocket costs with funds available in an HSA.
Despite thoughts of increasing bad debt while patients stash away tax-free dollars as a make-shift retirement plan, all hope is not lost. Health savings accounts are in their infancy and a majority of state legislatures still have a lot of work to do on this front. In 2005, most state legislatures were busy with bills and actions necessary to the establishment of HSAs and the tax implications. However, Nebraska went one step further and enacted Legislative Bill 465 which provides, in part, that except for outstanding qualified medical expenses, funds in a health savings account are not subject to levy, execution or judgment. In Nebraska, providers do have an opportunity to get at those dollars. Hopefully, more states will follow in 2006.
WHAT’S NEXT?
Having only been in the marketplace for two years, CDHPs are still in their early development. Relationships between insurers and financial institutions will continue to flourish as more insurers begin to offer CDHPs. In addition, more insurers may begin to operate banks. For example, Blue Cross Blue Shield recently announced the development of Blue Healthcare Bank to help consumers get greater financial control and simplify how they direct their healthcare spending. Blue Healthcare Bank is expected to begin operations in early 2007.
Providers should expect to see more state and federal legislative activity regarding the consistent administration of high-deductible health plans and health savings accounts. The Flex Health Savings Accounts Act of 2005, introduced in Congress in late 2005, is aimed at increasing the amount individuals can contribute to their HSA.
Finally, if industry surveys are to be believed, the number of people covered by HDHPs and contributing to HSAs is expected to continue to grow. More patients will be paying significant portions of their healthcare costs. Providers will need to continually examine every point of patient contact and every opportunity to collect – on the front end.
About the author:
Stacy L. Smith, Esq., is vice president of program management, AHC Healthcare Receivables Management, Manassas, Virgiina (ssmith@ahcinc.com).
Note: This article was previously published in the Receivables Report, published by Wolters Kluwer International, New York, New York. Used with permission
