Hospitals split on ending aid to uninsured Obamacare-eligible

Hospitals and health systems across the country are divided over whether to deny financial aid to uninsured patients who are eligible for subsidized health insurance under Obamacare but did not buy a plan. While a growing number of hospitals are adopting such policies, others have chosen not to as uninsured Americans grapple with the cost and complexity of obtaining coverage.

New provisos that limit free care and discounts have been added to the financial aid policies of Trinity Health, an 86-hospital Catholic system; Broward Health, a tax-supported safety net system based in Fort Lauderdale, Fla.; and the Southern New Hampshire Health System in Nashua. Ascension Health, the largest private, not-for-profit hospital system, is reviewing its charity-care policy in response to the Patient Protection and Affordable Care Act, a spokesman said.

These systems are following others that scaled back financial aid when the healthcare reform law began offering subsidized coverage through the insurance exchanges in 2014 to Americans with incomes from 100% to 400% of the federal poverty level.

The coverage subsidies have provoked debate among hospital executives about whether to curtail private aid in response. Some question whether it's appropriate for their facilities to allocate scarce financial resources to patients who could get subsidized coverage, and believe restrictions on aid could prod more uninsured to take advantage of the Obamacare options.

Executives at Catholic Health Initiatives, which operates 96 hospitals across 18 states, considered several possible changes to their financial assistance policy this year, including imposing penalties on patients who forgo insurance, and offering financial assistance to patients to help them pay premiums.

But CHI ultimately decided not to deny discounts to uninsured patients who don't buy a plan, just as the system does not deny financial assistance to insured patients who face substantial out-of-pocket costs, said Susanna Laundy, the Englewood, Colo.-based system's vice president of revenue cycle projects.

Consumers' limited experience with the new insurance markets and the exchanges' rocky start were two reasons behind the decision. “It's just in its infancy,” Laundy said. “We want to watch it mature and see where it goes.”

Keith Hearle, president of Verite Healthcare Consulting in Alexandria, Va., said only a small number of hospitals so far have adopted policies denying charity care for patients eligible for subsidized coverage under the reform law. But such limits likely will become standard in the future, he predicted.

Hospital charity-care policies have long played an important role in the U.S. healthcare safety net by forgiving the medical bills of the poor and uninsured. Now that role appears to be changing, albeit unevenly and amid concerns from hospital leaders. Some say public confusion about the law and tight household budgets are good reasons to leave financial aid policies unchanged. There also is an overlay of uncertainty about the law's future given continuing political opposition in Congress and pending court challenges.

About 60% of U.S. hospitals are not-for-profit, charitable organizations that are required to provide community benefits such as free and discounted care in exchange for their tax-exempt status. The amount that hospitals spend on free care as a percentage of their operating expenses varies widely. One 2013 study of 1,800 tax-exempt hospitals, published in the New England Journal of Medicine, found that the amount of free care they provided did not correspond to the local rates of uninsured.

The Affordable Care Act included new provisions for financial aid and collection policies that not-for-profit hospitals must meet or risk losing their tax exemption. But the provisions stop short of mandating who should be eligible for financial aid. Federal officials have not yet released final rules, but financial aid policies will likely undergo broad review at many hospitals once the rules are published, Hearle said.

Hospitals' new limits on financial aid gradually could prod more uninsured people to buy coverage, hospital executives say. In addition, some of the uninsured will face higher federal income tax penalties in 2015 for not obtaining coverage. The levy for those who remain uninsured will jump to $325 or 2% of their taxable income, whichever is greater, from the 2014 penalty of $95 or 1% of taxable income. The penalty increases again in 2016 to $695 or 2.5% of income.

While HHS estimates that 9 million to 10 million Americans will buy coverage on the exchanges for 2015, millions of uninsured people are not expected to get coverage.

A recent federal estimate said about 15 million uninsured people are eligible to buy coverage through the exchanges. Among uninsured adults surveyed in early November by the Kaiser Family Foundation, 4 in 10 said they planned to remain uninsured; of those, nearly one-quarter cited cost as the reason. Many, if not most, are likely eligible for premium subsidies.

Still, hospitals have grown more insistent that uninsured people buy coverage. At Trinity Health hospitals, patients whose incomes qualify them for subsidized health plans under the ACA but who “refuse or are unwilling” to buy them may be denied discounted care. Only patients who are eligible for Trinity's financial aid are also eligible for discounts on deductibles or co-insurance. In 2013, Trinity forgave $242.1 million in medical bills for patients who qualified for financial aid. Trinity officials were not available for an interview, a spokeswoman said.

Broward Health, a not-for-profit system which operates four hospitals in and around Fort Lauderdale, revised its policy in April “to reflect that patients would not qualify for charity care if they were approved for the subsidy for the health insurance exchange but chose not to enroll,” said spokeswoman Abigail Obre. The system does not offer financial aid to help with deductibles or co-insurance costs.

Broward Health's policy for subsidy-eligible uninsured patients is similar to the system's policy for uninsured patients who may be eligible for Medicaid. That policy requires patients to apply for Medicaid and be denied in order to qualify for charity care, assuming they meet the criteria, Obre said.

But officials at other hospitals point out that for 2014, many uninsured people who tried to enroll in the Obamacare exchanges may have given up due to the initially dysfunctional websites and the daunting task of comparison shopping for plans.

While the exchanges so far seem to be working more smoothly for 2015 enrollment, consumers still report significant confusion and lack of information, surveys show. For example, a high percentage of the uninsured aren't aware of the federal premium and cost-sharing subsidies that make coverage more affordable, according to a Kaiser Family Foundation survey.

Even with the premium subsidies, lots of people may find it unaffordable to obtain healthcare, given high deductibles, coinsurance and copayments, advocates say. The high-deductible plans available to individuals on and off the exchange market do little to make healthcare affordable and protect consumers, except for catastrophic events, said Debra Holmgren, president of St. Paul, Minn.-based Portico Healthnet, a not-for-profit with a state grant to help Minnesota consumers shop on the exchanges. Some uninsured who worked with Portico to buy insurance have dropped coverage. “It's still unaffordable,” she said.

That was one reason WakeMed Health & Hospitals, based in Raleigh, N.C., decided not to end its financial aid program for uninsured patients who also are eligible for subsidized plans, said Dudley Harrington, the system's vice president of revenue cycle. Another reason was the limited choice of health plans on North Carolina's exchange.

WakeMed is analyzing outstanding bills for claims that health plans did not pay after consumers stopped paying the health plans. “A lot of people signed up,” Harrington said. “But a lot of people also didn't pay their premiums.”

Uninsured patients who qualify for WakeMed's financial aid complete an aid application, and WakeMed staff refer those eligible to local enrollment agencies for help shopping for an exchange plan, he said. WakeMed offers free care to those with incomes up to 250% of the federal poverty level, or about $29,000 for an individual. Financial aid is available, even if patients fail to apply for health insurance or later drop coverage. The system has no plans to change its policy, Harrington said.

Denver Health, that city's safety net hospital, also has no plans to change its financial aid policy. “I don't feel it's appropriate to say you must do this brand-new thing or you can't get care,” said Dr. Bill Burman, director of Denver's Public Health Department, a division of Denver Health. He said the implementation of the Obamacare subsidized insurance system “was a big change, and not a simple one.”

Tenet Healthcare Corp., a publicly traded heath system, did not revise its financial aid policy for similar reasons, said Heather Smith, vice president of eligibility and enrollment services for the health system. “There is so much education needed,” she said.