Insurance Companies: Don’t Help Poor People with Their Premiums

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December 16, 2013; Wall Street Journal

Can a nonprofit organization—or even a nonprofit hospital—offer to pay the premiums for low-income people purchasing health insurance on the exchanges? In Los Angeles, a nonprofit called A Better LA signed up 50 people for insurance and announced it would pay between $50 and $100 a month of their premiums that aren’t covered by federal subsidies. Apparently, some nonprofit hospitals are also helping out patients with their premiums.

Why aren’t the insurers pleased? You would think that it wouldn’t make a difference to them so long as the premiums got paid, but apparently they don’t like the idea of people getting help above and beyond the federal subsidies. They fear, according to this article from the Wall Street Journal, that “help from nonprofits or hospitals could speed the arrival of less healthy customers into the exchanges, outpacing the arrival of younger, healthier people who might not cross paths with hospitals.”

Come again? Does that mean what we think it means, that the insurers would rather see the poverty of some people, making them unable to pay premiums, keep them away from using their coverage to seek healthcare treatment? Are the insurers hoping to disincentivize lower income clients on the assumption that lower income people are likely to be sicker and more expensive to—and less profitable for—the insurers? They seem to be arguing that nonprofit hospitals that might pay portions of customers’ premiums are in a conflict of interest situation, incentivizing patients to use more of the hospitals’ services, which would then be billed to the insurers.

Joseph Miller, the general counsel of American Health Care Plans, a trade association, darkly hinted that the ACA is supposed to prevent tax-exempt entities from enriching themselves or other organizations. It is totally unclear to this writer as to how A Better LA, with total revenues in 2011 of only $1.4 million but total expenses of $2.0 million, would be enriching itself by paying premiums for 50 people.

A Better LA’s plan has the approval of Covered California, the state’s insurance exchange, which doesn’t bar third-party payments. By paying part of these premiums, A Better LA is helping these formerly uninsured people get healthcare coverage—which is what the Affordable Care Act is all about. Having patients with insurance coverage, even with premiums partially paid by nonprofit hospitals, is a better deal for the hospitals, which would otherwise have to write off the costs of uninsured patients. This practice of helping out with premiums might be especially important in those 25 states that haven’t expanded their Medicaid eligibility, forcing many lower income households in those states to purchase health insurance that they really cannot afford to carry without the help of charity.

Meanwhile, the Obama administration can’t seem to generate consistent, reliable messages on the subject. This past fall, HHS Secretary Kathleen Sebelius wrote that insurance plans sold on the state exchanges weren’t federal healthcare programs and were therefore not subject to ACA rules meant to prevent healthcare providers, such as hospitals, from giving subsidies or rebates to enrollees. Within a week, however, in a guidance statement issued in November, HHS announced that the ACA was meant to discourage hospitals from paying enrollees’ premiums and directed insurers to reject premium payments made by hospitals and others on behalf of households. The HHS fear was, according to the guidance, that charitably generated premium payments “could skew the insurance risk pool and create an unlevel field.”

For households caught in situations where, for one reason or another, they have to purchase private health insurance but are too poor to qualify for cost-reducing subsidies, A Better LA’s intervention means the difference between accessing insurance-covered healthcare and simply avoiding treatment because of the lack of affordable insurance options. The ACA does much to make healthcare profitable for insurance companies, regardless of their incessant complaints about the law. Notwithstanding the confusing and contradictory guidance issued by the HHS, the opposition of the insurers suggests that they may be way more interested in their profit margins than in guaranteeing affordable health care for the millions of Americans who currently are among the ranks of the uninsured.—Rick Cohen