Unemployed and Uninsured: Can Hospitals Cover Patients' COBRA Premiums?
The economic impact of the COVID-19 virus has caused millions to lose their jobs and, along with it, their health insurance. Electing to continue coverage through COBRA is an option, but many times an option that is not affordable for people with no income. Hospitals can now expect to see a surge of patients that are in exactly this position. Can a hospital opt to pay the patients’ COBRA premiums in order to assure payment for its services? The answer is that it depends on the circumstances.
Public hospitals that are the regional “safety net” hospitals are required to accept the patient regardless of the patient’s ability to pay. If the patient has no insurance and is not able to pay, the hospital has options such as enrolling the patient in Medicaid if the patient is eligible, or including the patient in 1 Note that this article address payment of COBRA premiums under employer-sponsored plans. It does not address Federal Marketplace individual policies, which are federally funded. its indigent care program. For these hospitals, paying the patient’s COBRA premium would not be an attempt to attract the patient to the hospital, since the patient must be accepted regardless of ability to pay. Instead, paying the COBRA premium would be just another way to assure that the hospital is paid for its services.
Further, once the COBRA coverage is in effect, the patient would be free to get treatment at any facility of his/her choosing, assuming the hospital did not condition payment of the premium on being the patient’s exclusive provider. In fact, many hospitals openly make this their policy. There can, however, be concerns that paying a patient's COBRA premiums is a way of inducing the patient’s patronage.
While the COBRA law is a federal law, COBRA insurance is not a federal health care program because no part of it is paid for by state or federal dollars. Therefore, the federal health care fraud and abuse laws that apply to Medicare and Medicaid are not applicable to COBRA. And neither CMS nor the OIG has adopted an express prohibition on the practice of hospitals paying patients’ COBRA premiums.1 The IRS has, in its 1999 Final Rule on Continuation Coverage Requirements Applicable to Group Health Plans, squarely addressed the issue by stating “Nothing in the statute requires the qualified beneficiary to pay the amount required by the plan; the statute merely permits the plan to require that payment be made.” They go on to state that “any person may make the required payment on behalf of the qualified beneficiary.”
To be clear though, this is only the position of the IRS and not other governmental agencies.
The issue may also depend on the state the hospital is in. States can have their own health care fraud and abuse laws that are applicable to commercial insurance. Local health care counsel should be consulted to determine if there are such laws and how they impact this practice. If faced with whether or not this would be permissible for your facility, considerations would include:
Whether or not paying the COBRA premiums is intended to induce patient patronage as opposed to just assuring payment for services.
Whether or not your facility accepts patients regardless of ability to pay.
Whether or not your contracts with payers prohibit the practice. Any applicable state law.
The economic impact of the COVID-19 virus has caused millions to lose their jobs and, along with it, their health insurance. Electing to continue coverage through COBRA is an option, but many times an option that is not affordable for people with no income. Hospitals can now expect to see a surge of patients that are in exactly this position.