Insurers that participate in the Affordable Care Act marketplaces have complained that that enrollment eligibility rules are being abused in ways that have increased the cost of marketplace coverage and destabilized the marketplace risk pools. On December 12, the Centers for Medicare and Medicaid Services (CMS) took two steps to respond to their concerns. CMS issued an interim final rule to limit third party payments for individual market coverage (fact sheet). It also issued another fact sheet explaining how its new pre-enrollment verification for the special enrollment period pilot program will operate.

Rule Requires New Disclosure When Dialysis Facilities Pay Marketplace Premiums

The first cause of market instability identified by health insurers is the enrollment in their plans of high-cost individuals whose premiums are paid by third parties. In particular, they have been concerned that renal dialysis facilities are paying, either directly or through charities to which they contribute, premiums to allow very high-cost end-stage renal disease (ESRD) patients to enroll in marketplace plans. The motivation for this practice, it is claimed, is that commercial insurers are paid far more by commercial payers than by Medicare or Medicaid, both of which cover treatment for ESRD. The enrollment of high-cost dialysis patients who would eligible for public coverage, however, significantly increases the cost of those plans to insurers, and ultimately to enrollees. Enrollment in marketplace rather than public coverage, moreover, may have significant disadvantages for patients.

In August, CMS issued a request for information attempting to learn more about third party payment practices and their effects. On December 13, CMS issued an interim final rule. The rule is not a marketplace rule, but rather a rule issued by CMS in its capacity as a regulator of ESRD facilities through the Medicare program. It does not ban third-party payments, but it requires disclosure by ESRD facilities both to patients and to insurers, and it is likely to effectively end the practice for most patients.

End-stage renal disease (ESRD) is an irreversible and permanent kidney disease that can only be treated through regular kidney dialysis or kidney transplantation. Medigap coverage, however, is unavailable to ESRD Medicare enrollees under age 65 in many states. Medicare provides coverage for ESRD patients regardless of age or disability. State Medicaid programs also cover low-income ESRD patients under one of several mandatory or optional Medicaid categories. About 88 percent of ESRD patients receiving renal dialysis are enrolled in Medicare and 42 percent in both Medicare and Medicaid.

There are approximately 6,737 renal dialysis facilities in the United States which receive payments from Medicare. Comments received by CMS in response to its request for information suggest that commercial payment rates for these facilities are far higher than rates paid by Medicare or Medicaid. Comments suggested that facilities are paid four times as much by commercial than by public payers, allowing them to make as much as $100,000 to $200,000 more per year per patient. But premiums for individual market coverage only cost $4,200 per year; thus, there is an incentive for the providers to steer their patients to commercial coverage and pay the full premium.

Insurers are not allowed to sell individual coverage to individuals enrolled in Medicare. Individuals eligible for Medicaid coverage are not eligible for premium tax credits or cost sharing reductions through the marketplaces. But facilities have been able to steer individuals who begin dialysis treatment and who are not yet enrolled in Medicare to marketplace coverage and pay their full premium, either directly or through charities to which the facilities contribute, and thus ensure higher payments for their services. Insurers report that the number of enrollees in individual market plans have increased two to five times in recent years, and more than doubled between 2014 and 2015. CMS estimates that as many as 90 percent of dialysis facilities have been making third party payments.

Hazards For Consumers

CMS has concluded that this practice can be harmful to consumers. First, it may interfere with the ability of patients to obtain kidney transplants. A transplant is often the best long-term treatment for kidney failure, yet transplants may not be available for individuals who cannot show that they will have access to continuous health coverage after the transplant to cover, for example, the costs of monitoring and immunosuppressant medications. Since dialysis facilities typically stop paying premiums for coverage once the patient no longer needs dialysis, individuals insured through third party payments may not be able to demonstrate continuing coverage and thus may lose their place in transplant queues.

Second, patients enrolled in commercial coverage are likely to experience higher cost. They may face high cost sharing for non-dialysis services, which could have been covered by Medicaid. They may also be limited to network providers and thus incur balance billing they would not face under Medicare if they receive out-of-network services. The preface to the rule notes, however, that some patients may face higher cost sharing under Medicare than under commercial coverage; thus, patients are not always better off under commercial coverage.

Finally, patients may risk mid-year disruption of services if the facilities cease paying the premiums or insurers cease accepting them. Payments and services may be disrupted as they attempt to enroll in public coverage. Comments received by CMS stated that facilities have been steering patients to the individual market coverage without fully disclosing public coverage options or the disadvantages of private coverage and have been compensating social workers for steering patients or retaliating against social workers who fail to do so.

What The Rule Requires

Under the interim final rule, dialysis facilities that make third party payments for individual coverage, either directly or through a charity must, provide a disclosure to their patients annually. The disclosure must indicate how a patient’s access to and cost for ESRD care and other care would be affected by individual market versus Medicare and Medicaid/CHIP coverage, and how each option would affect anticipated pre- and post-transplantation costs. This would include disclosure of potential gaps in coverage or penalties if enrollment in Medicare is delayed. Facilities must also disclose information about their premium assistance programs, including limits on that assistance and potential termination if patients switch facilities. Facilities must, finally, disclose to patients information about “reimbursements for services that the facility receives as a result of subsidizing such enrollment.”

The regulation further requires facilities to disclose to individual market insurers the fact that the facilities are paying premiums, either directly or through charities, and receive assurances from the insurers that the insurer will accept payments throughout the plan year. The facility may not pay the premiums unless such assurances are received. Since insurers actively oppose third party payments, and since CMS has earlier said that it discourages such payments, this rule is likely to put an end to most third party payments for ESRD treatment. But CMS states that it is considering an absolute prohibition of third party payments if disclosure proves inadequate to end perceived abuses.

The rule goes into effect 30 days from its publication in the federal register, except payments can continue until July 1, 2017 for patients not enrolled in Medicare Parts A and B and who intend to enroll in these programs during the 2017 general enrollment period.

Individual market insurers continue to be required under earlier rules to accept third party payments from Ryan White programs, government programs, and Indian tribes, tribal organizations, and urban Indian organizations. Facilities are not restricted from otherwise making charitable donations to organizations that otherwise support access to care.

It may be significant that the rule imposes disclosure requirements rather than simply ending the practice. The preface acknowledges that some patients may under some circumstances find private coverage advantageous. The rule will also not end charitable assistance for ESRD patients. Private charities helped ESRD patients with cost sharing and transportation costs and with premiums for Medigap and Medicare, and group health coverage long before the marketplaces began, and will continue to do so. But it does respond to one more concern of insurers and may promote the stability of the ACA marketplaces.

Special Enrollment Period Eligibility Verification Pilot

The second CMS initiative addresses alleged abuse of special enrollment periods. The ACA establishes annual open enrollment periods for the individual market. It also establishes special enrollment periods (SEPs) recognizing that certain life changes can occur unexpectedly. Individual market and marketplace regulations recognize a range of special enrollment periods for life changes like loss of minimum essential coverage, marriage, the birth of a child, or moving to a new location where current coverage is not available.

Insurers have complained that SEPs have been abused, allowing healthy individuals to forgo enrolling during open enrollment periods and to delay coverage until they need medical care. Insurers believe that abuse of SEPs enrollments have significantly increased their costs, requiring them in turn to increase premiums.

CMS has taken a number of steps in recent months to address this concern, eliminating some SEPs, tightening up on the definition of others, and requiring special enrollment applicants to submit documents confirming their eligibility — although until now enrollment has not been held up pending eligibility confirmation.

On December 12, 2016, CMS released the details of a pilot program it intends to implement for pre-enrollment verification of eligibility for special enrollment beginning in June of 2017. CMS will implement the pre-enrollment program in all 39 states served by Healthcare.gov. All SEPs will be subject to some form of enhanced verification, either through the pilot or in some other way. Applications claiming loss of minimum essential coverage will in particular be subject to the pilot.

Fifty percent of all new applications will be randomly selected to participate in the pilot. These applicants will be able to submit their application and select a plan, but then their application will be pended until the consumer submits documentation establishing eligibility for the SEP. Applicants will have 30 days to submit the documentation. If eligibility is established, CMS will send the application to the insurer whose plan is selected by the consumer and coverage will be retroactive to the date of plan selection if the applicant pays the premium.

Documents can be uploaded to the applicant’s account or mailed. The call center will be able to provide applicants information on the status of their documents. Curiously, the fact sheet does not mention electronic verification of eligibility without required documentation, although it would seem this would be possible for at least some applicants. CMS will offer extensive training to agents and brokers, navigators, and other assisters on helping consumers document their eligibility.

CMS will evaluate the impact of the program on 2017 claims and on enrollment and other metrics. The fact sheet states that the number of consumers enrolling through special enrollment periods has declined 20 percent compared to 2015 since CMS started requiring documentation of SEP eligibility in June, with every week since implementation of the enrollment confirmation process showing lower enrollment than the corresponding week in 2015.

CMS also states, however, that younger consumers are disproportionately less likely to complete the verification process than older applicants, with 73 percent of applicants age 55-64 completing the process but only 55 percent of those 18 to 24. This would seem to confirm the view of some consumer advocates that the best course for stabilizing the risk pool is to make it easier rather than harder for eligible consumers to get SEP coverage.