September 2014

COBRA – Good News for Employers trying to Manage Loss Ratios

Employee’s eligible for Cobra can opt for “Marketplace coverage” instead of COBRA.

Employees and their families eligible for, but not enrolled in, COBRA continuation insurance are able to enroll in Marketplace coverage outside of the normal open enrollment period, in most cases. It’s very possible employees eligible for COBRA continuation coverage could save on their monthly health insurance premiums by purchasing health insurance through the Marketplace. (Most employers offer a two or three plan choices with one carrier while the Marketplace makes all options, insurance carriers and plan designs, available that are offered in the Exchange.)

Updates to model notices informing employees of their eligibility to continue health-care coverage through the Consolidated Omnibus Budget Reconciliation Act are now available. The updates make it clear to workers that if they are eligible for COBRA continuation coverage when leaving a job, they may choose to instead purchase coverage through the Health Insurance Marketplace.

Employees and their families who are eligible for employer-sponsored coverage generally must be informed of their right to COBRA continuation coverage at the start of employment. They must also be informed of their right to purchase COBRA coverage when separating from a job. The proposed changes to the model notices would offer information on more affordable options available through the Marketplace, where workers and families may be eligible for financial assistance that would not otherwise be available for COBRA continuation coverage.

Fraud? – HDHP 50% Prompt-Pay Discount

Scenario: Employee has a HDHP and goes to Hospital. Hospital offer to discount the employee’s deductible by 50%. (i.e. Employee owes only half of the deductible, $3,000 debt is now $1,500.) The plan pays the full amount due above the deductible.

Has fraud been committed (knowingly or not)?

It is fraud because there’s a 3rd party involved – the insurance carrier or self-funded medical program. are providing an HDHP contract which pays “after the deductible has been met” – pursuant to the IRS rules to establish HSAs, etc. The representation is to them – that the deductible has been met – when it has not been met – a lie to gain profit (in this case the payment of the balance from their coverage). 

If a participant pays their “50%” out of their HSA / HRA account – then the insurance may end up getting a feed that illustrated the participants hadn’t met their deductible – even if the hospital is billing as if they had.  It is not uncommon for an HSA administrator to process first and pass along their EOBs to the insurance to match up with the provider bills.  In those cases, it would be a problem – because the insurance isn’t going to pay the hospital anything without knowing the full deductible had been satisfied.

The DOJ has not prosecuted this type of fraud in many years, but it seems rife for a state DOI to get involved.

Thanks to my CEBS’ colleagues. The above example and discussion came from our online link discussion.

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