Texas Medicine

AUSTIN, January 23, 2015 - Two conflicting court rulings on the use of health insurance premium subsidies could affect patients' health — and doctors' wallets.

On July 22, the U.S. Court of Appeals for the District of Columbia Circuit ruled that the government should not be providing premium subsidies to consumers buying health insurance in states like Texas that use HealthCare.gov, the federally run Affordable Care Act insurance exchange.

But, later the same day, the U.S. Court of Appeals for the Fourth Circuit in Richmond, Va., upheld the current practice of allowing premium subsidies for anyone buying health insurance in either the federal marketplace or a state exchange.

The U.S. Supreme Court will likely sort out the confusion.

If the D.C. court's interpretation of the law comes out on top, patients who purchased coverage in the federal marketplace might no longer be able to afford their premium payments. Premium subsidies cut the cost of coverage by an average of 76 percent, according to a July 22 Washington Post article.

If patients stop paying their premiums, insurance companies will likely look to doctors for reimbursement for procedures they performed on patients after they defaulted.

TMA Vice President and General Counsel Rocky Wilcox says there's no way to know which ruling will prevail.

"If the courts follow the law as written, insurance purchased thorough federal exchanges will not qualify for subsidies. It is difficult to know if the ultimate decision will follow the statutory language as written or be creative," he said.

Since the ACA enrollment period began last October, 5.4 million people in 36 states, including Texas, signed up for coverage using the federal marketplace, according to "Health Care Coverage Under the Affordable Care Act — A Progress Report," published July 17 in the New England Journal of Medicine (NEJM).

Nationwide, 85 percent of the people who selected a plan in either the federal or a state marketplace were eligible for premium subsidies to help them pay for it, NEJM states.

The D.C. case, Halbig v. Burwell, resulted in a 2-1 opinion, in which Circuit Judge Thomas Griffith stated that Title 26 of the Internal Revenue Code, Section 36B, which was part of ACA, makes tax credits available as a form of subsidy to individuals who purchase health insurance through marketplaces established by the state.

Judge Griffith says the Internal Revenue Service (IRS) interpreted the law too broadly and allowed tax credits also for individuals who purchase insurance through the federal marketplace.

"Because we conclude that the ACA unambiguously restricts the Section 36B subsidy to insurance purchased on exchanges 'established by the state,' we … vacate the IRS's regulation," he wrote.

In August, the U.S. Justice Department asked the full D.C. circuit court to review the decision. Eleven active judges sit on the court, all of whom will weigh in on whether to rehear the case, The Baltimore Sun reported.

Lufkin ophthalmologist Thomas Duncan, MD, says there's no reason the D.C. court ruling should not prevail. He says the entire ACA is flawed and legislators failed to read the massive document before passing it.

"They wrote it, they've got it, and now they can live with it," he said.

Dr. Duncan says insurance companies that participate in the marketplace aren't covering what patients need. Recently, he says, a patient's insurance plan, which the patient purchased using the federal marketplace, would not pay Dr. Duncan to perform necessary cataract surgery on the patient because he does not participate in that health exchange plan. But the insurer was willing to cover the procedure if another, less experienced doctor from out of town performed it, Dr. Duncan says.

"I think Obamacare needs to go," he said. "People are not getting what they need."

Tom McHorse, MD, a gastroenterologist at Austin Regional Clinic (ARC), is a 30-year volunteer physician at Volunteer Healthcare Clinic in Austin, which assists indigent patients who don't qualify for government assistance. He also serves as chair of the Travis County Medical Society Project Access program, which provides medical services to low-income and uninsured Travis County residents.

He argues it's illogical that the D.C. court ruling should prevail, "but if it did, it would cause all sorts of chaos," he said.

When Patients Default, Doctors Pay

Under ACA, one of the subsidies that patients can qualify for to lower their monthly premium costs is an advanced premium tax credit (APTC). Unlike tax credits patients can claim only when they file their taxes, APTCs are available right away.

According to ACA, if a patient who receives an APTC does not pay his or her health insurance premiums in full, insurers must give them 90 days to catch up. During the first month of the 90-day grace period, the patient continues to have coverage, and the insurer must pay claims for physician services. During the second and third months of the grace period, the insurer may pay, hold, deny, or later recoup claims payments made during that time. TMA officials say insurers must comply with Texas' prompt pay law for claims submitted at any point during the grace period.

If the patient pays his or her premiums in full before the end of the 90-day grace period, the patient retains coverage, and the insurer is responsible for paying the pended claims.

Dr. McHorse worries that if patients don't pay their premiums, physicians will be the ones to bear financial risk because insurers will recoup payments made to doctors during the latter part of the grace period. Insurers have told TMA that while they have implemented systems to notify doctors when patients enter the grace period, the insurers are intent on recouping claims payments to doctors for services to patients who are delinquent on their premiums. (See "The ACA Marketplace," April 2014 Texas Medicine, pages 16-25; and "Untested Waters," December 2013 Texas Medicine, pages 37-42.)

If the D.C. ruling takes away patients' subsidies, causing the cost of insurance for patients with subsidies to skyrocket, this situation could become more common because many patients would likely default on their premiums, Dr. McHorse says.

"It would have an overwhelmingly negative effect on people in Texas and nationwide because the vast majority would not be able to afford health insurance," he said.

TMA President Austin King, MD, agrees that the D.C. ruling would make more patients stop paying their premiums and put physicians on the hook for reimbursing the costs of procedures performed during the grace period.

"If it's just a few office visits, that's not too bad," he said. But, he says, if you're a surgeon who receives thousands of dollars for each procedure, the ruling could significantly impact your finances.

Dr. King says the hazard of patients defaulting on their health insurance premiums exists with or without the D.C. court ruling.

"That's a risk every doctor takes when he or she treats an exchange patient," he said. But, he says, the risk might be much greater if the D.C. court ruling is upheld, leaving more patients unable to afford their premiums.

Dr. King says TMA is pushing carriers to notify physicians immediately when a patient has not paid his or her premiums so the physician can then counsel the patient about possible payment options, or, in the case of a new patient, assess whether to accept the patient into the practice. Under ACA, health insurers are required to notify physicians of patients' grace period status. (See "TMA Offers ACA Guidance.")

Dr. McHorse says large metropolitan areas, where population growth is high, will not be as affected by the change in subsidy availability. But areas with low population growth and low average income will feel the effects if the D.C. court ruling stands, he says.

Because many low-income patients will no longer be able to afford insurance, he says, doctors in private practice would see fewer patients and make less money.

Just as it was before ACA took effect, uninsured patients will seek treatment in hospitals instead of in private practices. Dr. McHorse says the changes wouldn't likely put any private practices out of business, but physicians would treat fewer insured patients.

Ruling Appealed to Supreme Court

A new open enrollment period is set to begin Nov. 15. Dr. King says the conflicting court opinions could make insurance companies wary about participating in the marketplace for fear their customers would default on their insurance premium payments.

"If I were a carrier, I would be concerned," he said.

Dr. McHorse does not expect the conflicting court rulings to hold back uninsured people who want to enroll.

"I don't think the threat that they may not have subsidies is significant at this point," he said. "Overwhelming use of the law as it is would make it very logical to sustain the Richmond ruling."

A three-judge panel ruled unanimously on the Richmond case, King v. Burwell. In its decision, the court said the language of ACA is ambiguous and could be interpreted a number of ways.

Circuit Judge Roger Gregory wrote that the tax credits are essential to fulfilling the primary goals of ACA.

Senior Circuit Judge Andre Davis wrote that the purpose of ACA is to provide affordable health insurance options. Just because the Virginia residents who brought the case did not want to buy health insurance, he says, does not mean the court will deny affordable coverage to millions of Americans.

On July 31, the Virginia residents filed a petition to appeal the case to the U.S. Supreme Court. Until then, there will be no change to ACA premium subsidies or coverage obtained from any of the ACA exchanges.

Kara Nuzback can be reached by telephone at (800) 880-1300, ext. 1393, or (512) 370-1393; by fax at (512) 370-1629; or by email.

Legal articles in Texas Medicine are intended to help physicians understand the law by providing legal information on selected topics. These articles are published with the understanding that TMA is not engaged in providing legal advice. When dealing with specific legal matters, readers should seek assistance from their attorneys.

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