Exchange Plans Could Undermine ER Safety Net

R. Myles Riner

R. Myles Riner , MD, FACEP

Partner Emeritus

Published June 20, 2013

Most everyone assumes that the Patient Protection and Affordable Care Act (PPACA) facilitated Exchange Plans, by increasing the number of insured patients and reducing the rolls of the uninsured, will generate additional revenues for hospital Emergency Departments and emergency physicians. However, the net effect of these Exchanges and other aspects of the ACA could spell disaster for many emergency care safety net providers.

On the surface, it appears the PPACA should have a positive impact on payer mix for most ERs. In 2012, the Abaris Group ran some projections for the Santa Clara County EMS Agency in California that suggested that as a result of full implementation of the ACA, including expansion of Medicaid and fully operational Exchange Plans, by 2022 the percentage of uninsured in the county’s EDs would decrease from 12.9% to 3.3%, and the percentage of commercially insured would increase from 37.4% to 43.7%.


Changes in ED Payer Mix with ACA

Based on these projections, it would appear that Obamacare could result in a bonanza for emergency care providers. To get a more accurate picture of the financial impact of Obamacare on the ER safety net, however, one needs to look more closely under the hood.

California has had a good head start on the development of PPACA generated Exchange Plans (called Covered Calfiornia), and it is likely some or even many of the policies adopted by the CA Exchange Board will show up in a similar form in Exchange Plans across the nation. One of the policies that was proposed by the staff of the Exchange Board would have set the benefit standard for out-of-network benefits at the 50th percentile (median) of usual and customary charges using the FAIR Health database. However, when it came to whether this standard would apply to emergency care claims as well as for elective services, the staff advised the Board that the PPACA already had its own standard for out-of-network emergency care services: the so-called ‘greatest of three’ benefit standard (the three being Medicare rates, median contracted rates, and plan’s usual OON benefit rates). Of course, according to the Department of Labor, these rules in the PPACA do not apply when a state prohibits balance billing of these claims as the patient would not then need to be protected from the consequences of inappropriately low benefit determinations (Q15). Therefore, exchange plans in California that fall under Knox-Keene Regulation would have no fair payment standard to meet for emergency care providers. Unfortunately, it is likely that with all the influence health plans have on the Exchange Board in California, even the staff’s recommendations to use FAIR Health for elective OON services will be gutted. The consequence of all of this is that the new Exchange Plans in California (and elsewhere) will be paying emergency care providers who are out-of-network at rates that are extremely low, probably far below what regular commercial plans pay. It is expected that many enrollees who are currently insured in the commercial market will drop out of this market and transition to cheaper Exchange driven policies, which will pay even less to emergency care providers.

Rumor has it that the Exchange plans intend to offer contracted rates to hospital based providers that are not only stratified based on the ‘metal level’ (platinum, gold, silver, copper) of the enrollee’s policy, but driven down well below current commercial contracting rates by aggressive coercive contracting. Thus, it is not only OON rates for ER care that will be deeply discounted, but contracted rates as well. In addition, most of these Exchange offered plans involve high ED copays, high coinsurance rates, and high deductibles, all of which put pressure on emergency physicians and on-call physicians to collect this money directly from enrollees, and compete with hospitals for these payments. Exchange enrollees are not likely to have lots of spare cash to pay out, especially to providers that may never see again.

I have already discussed in another post the impact that Obamacare will have in states where many of the currently uninsured will be covered under expanded Medicaid programs. The net effect of this expanded coverage will be a surge in newly insured patients with nowhere else to get care presenting to our EDs for medical services they were reluctant to access when they had no coverage. In most states, Medicaid payment rates fail to cover the cost of providing this care, and EDs that are already over-crowded are going to have to somehow find and hire more providers to service these new Medicaid enrollees. If you loose money with every widget you make, you can’t make up the loss by making more widgets. On top of this, the expansion of Medicaid is likely to overwhelm many of the existing clinics that currently provide care for the uninsured, and undocumented immigrants. The lack of appointment space at these clinics will force many more of those who remain uninsured after Obamacare into our EDs, placing a further financial burden on emergency care providers. According to an article in the NY Times: “In Central California, Harry Foster, Director of the Family HealthCare Network, another primary care center, called the Affordable Care Act “a double-edged sword.” Many low-wage earning citizens now lack employer-sponsored health insurance, and the health care industry is already competing for those who will gain coverage through the law. But no one is competing to treat those it leaves out, he said.

In addition, there is the impending loss of funding for disproportionate share hospitals. The federal government has been spending $20 billion annually to reimburse these hospitals — most in poor urban and rural areas — for treating more than their share of the uninsured, including illegal immigrants. The health care law will eventually cut that money in half, based on the premise that fewer people will lack insurance after the law takes effect. However, the estimated 11 million people now living illegally in the United States are not covered by the health care law. Obamacare sponsors, seeking to sidestep the contentious debate over immigration, excluded them from the law’s benefits. As a result, so-called safety-net hospitals said the cuts would deal a severe blow to their finances. The Times article also said: “Congressional staff members acknowledged that the health care law would scale back the money that helps pay for emergency care for such patients, but were reluctant to tackle the issue”. One hospital administrator in Florida “was told in Washington that they understand that this is a problem, but immigration is just too hot to touch.”

At a recent ACEP Leadership conference, one of the speakers, a former CMS executive, expressed the belief that emergency medicine has a brighter future in store, considering the billions of dollars in new government money that Obamacare is going to pour into health care services, and all the uninsured patients who will soon gain coverage. Undoubtedly, there will be some hospitals and emergency departments and emergency physicians who will reap the benefits of this cash infusion; but for many EDs and emergency care providers, the net-net effect of Obamacare and the new Healthcare Exchanges and Medicaid expansion programs may well be more of a financial dilemma than a bonanza, and ‘break-even’ might be considered optimistic.

This was first published in The Fickle Finger.

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