Hospital Payment Assistance Program Will Benefit Colorado’s Uninsured Population

Colorado Senate Bill 12-134 was sent to the Governor’s office yesterday for his signature after being signed by the Speaker of the House on Tuesday.  It’s expected to take effect in August.  The Hospital Payment Assistance Program bill was introduced by Senator Irene Aguilar (D, Denver) in January (you can use this link to see the history of the bill.  In the drop-down menu at the top, select “senate bills 101 – 150”.  Once those pull up, scroll down to bill 134 and you’ll see a “history” link, along with other details about the bill).

SB12-134 will result in some significant changes in terms of how uninsured patients are billed when they receive treatment in a hospital (note that the bill only applies to hospitals – outpatient clinics, medical offices, and other non-hospital providers will not be impacted).  Most people are aware that private health insurance carriers have negotiated rates that are lower than the “retail” price for medical services.  Medicare and Medicaid have even lower negotiated prices.  The reason SB12-134 is so important is that uninsured patients (usually those who have the least ability to pay medical bills) typically get charged the retail price.  There is usually a cash discount available, but most uninsured patients typically don’t have enough cash sitting around to pay the whole bill up front.  So – assuming they are able to pay the bill at all – they often end up on a payment plan (sometimes through a third party where interest rates can rival those of credit cards) and ultimately pay far more than any insurance carrier would pay.

SB12-134 applies to medically necessary care provided to uninsured patients who have a family income of not more than 250% of the federal poverty level ($57,625 for a family of four in 2012).  And SB12-134 applies only if the care is not eligible for coverage through the Colorado Indigent Care Program (CICP).  For those patients, hospitals may not charge more than the lowest rate they have negotiated with a private health insurance plan.  This is a huge change from the status quo.

SB12-134 also requires hospitals to clearly state their financial assistance, charity care, and payment plan information on their website, in patient waiting areas, directly to patients before they are discharged, and in writing on the patients’ billing statements.  Hospitals will also have to allow a patient’s bill to go at least 30 days past due before initiating collections procedures.

There’s no doubt that the Hospital Payment Assistance Program will be beneficial for uninsured patients.  And it might result in fewer billing headaches for hospitals.  We’ve all heard stories of people who get a bill for x amount and then spend months haggling with the hospital billing department to finally get the bill reduced down to y amount.  Maybe if the initial bill is already at the lowest negotiated health insurance carrier price,  it will be more of a “no-haggle” situation that results in payments being made more rapidly following a hospitalization.

On a bit of a tangent, I found an article that discusses SB12-134 and brings a couple of human interest stories into the mix.  The first story, about a man who suffered a heart attack just weeks after losing his job and his health insurance, is very relevant – those are the people SB12-134 is designed to help.  His total bill when he left the hospital was $60,000, and he lives on $700/month in unemployment benefits.  Interestingly enough however, the article states that he negotiated for a year and has gotten the bill reduced to just over $4,000.  I would assume that is far lower than the lowest negotiated health insurance carrier price for hospitalization related to a heart attack.

Even more interesting is the second story in the article, about a teacher from Leadville, Colorado who tore her LCL and ACL while snowboarding.  She has health insurance through her employer, but wasn’t aware of the plan details until after her injury.  She has a $1000 deductible and is responsible for an additional $2750 in coinsurance since her plan provides 80/20 coverage (the article doesn’t state what the coinsurance maximum out of pocket is, but 80/20 plans are by far the most common design).  The article refers to her as “underinsured” and details her struggles with making payments to the Vail Valley Surgery Center for her deductible and coinsurance.  I understand that to suddenly be facing a nearly $4000 medical bill is less than ideal.  But to call this patient “underinsured” is perhaps a bit misleading.  The average deductible on traditional (not HSA qualified) health plans is over $1000.  For plans where an HSA or an HRA is involved (which are increasingly popular as employers try to control health care costs), the average deductible is over $1900.  Although it’s fairly common for HSA qualified plans to provide 100% coverage after the deductible, most traditional plans still have 80/20 coverage after the deductible.  So we have to assume that the out-of-pocket costs experienced by the Leadville teacher are actually the rule rather than the exception.  I would say that the word underinsured ought to be reserved for people with mini-meds.  Or those who have health insurance policies with more holes than Swiss cheese, or a plan with unlimited coinsurance (most policies have an out-of-pocket maximum of a few thousand dollars on the coinsurance – occasionally you’ll see a plan that’s just 80/20 with no cap on what the patient pays.  This can get out of hand quickly in the event of a large medical bill).  If we start using the word underinsured to describe people with average (or better than average) health insurance, it will start to lose its meaning.  Yes, “average” has become not-so-great in terms of health insurance coverage, but it’s still dramatically better than the coverage of those who are truly “underinsured”.

Either way, SB12-134 applies to patients who are uninsured rather than those who are insured but struggle to pay their portion of the charges.  Even so, the bill’s requirement that hospitals clearly define their payment plan options and discount programs might end up helping people who are insured but have to pay their bill in installments.

About Louise Norris

Louise Norris has been writing about health insurance and healthcare reform since 2006. In addition to the Colorado Health Insurance Insider, she also writes for healthinsurance.org, medicareresources.org, Verywell, Spark by ADP, and Boost by ADP, and Gusto. Follow on twitter and facebook.

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