What is a Third Party Premium Payment?
In case you haven’t heard the news, there’s this thing called the Affordable Care Act, and it’s pretty complicated. That’s not exactly surprising, given that the health care system the ACA intends to reform is sprawling and complex.
As ACA implementation proceeds and more Americans are gaining access to health insurance, the issue of third-party premium payments – when a person or organization pays your health insurance bill on your behalf – is getting new attention. On the surface, it would seem like a no-brainer to allow third parties to pay for others’ health insurance; the insurer gets paid, the consumer is able to receive insured medical care, and the payer has done a good deed. What’s wrong with that? Well, as with most no-brainers, it’s not quite as simple as it seems.
For starters, the US Department of Health and Human Services (HHS) has advised health insurance companies to reject third-party premium payments except in specific circumstances. For example, it’s OK to accept these payments if they are coming from state or federal government programs that provide premium and cost-sharing support, or from the Ryan White HIV/AIDS Program, or from organizations connected to Indian tribes.
In addition, HHS advises that assistance in paying premiums must be based on financial need or geographic location rather than health status; premium assistance must be guaranteed for an entire calendar year; and people receiving premium assistance should not be limited in their choice of insurers or insurance plans.
Restrictions and Risks
BCBSNC recently announced that we will accept premium payments made by United Way of the Greater Triangle to help low-income families and individuals pay for health insurance. The United Way of the Greater Triangle’s pilot program meets the HHS requirements for third-party payments.
But why are there restrictions at all? The HHS guidelines are meant to minimize the chances that third-party premium payments could invite conflicts of interest or, more significantly, lead to adverse selection.
Adverse selection can change the makeup of the insurance pool – and not for the better. BCBSNC’s Director of Health Policy Walker Wilson explains the issue for us:
“There’s a correlation between income levels and overall health. If the people receiving premium assistance from third parties are sicker than average, the insurance pool will skew toward people who need more expensive health care. When that happens, insurance rates rise for everyone because there aren’t enough healthy people paying into the pool to cover the costs of the sick people.”
Bottom line: If a program pays health insurance premiums only for people in poor health whose health care costs are higher, we all pay more for health insurance. That’s the dynamic that governs any insurance pool.
HHS continues to monitor third-party premium payments and will issue further directives if they become necessary. In the meantime, BCBSNC will abide by the HHS recommendation to refuse third-party premium payments except in the circumstances mentioned earlier, and we’ll continue to review our policy as circumstances warrant.
One of the primary goals of reform is to increase access to health care while improving its quality. That’s complicated and it won’t happen overnight, but with doctors, consumers and insurers working together, we’re making progress.
[top image: shutterstock]