Medical Debt De-Weaponization and Employer Health Plans

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Medical debt discharge is a relatively unknown term that is likely to gain popularity soon thanks to proposed North Carolina legislation. A North Carolina lawmaker used the term for a bill that would include a list of consumer protections related to the causes of medical debt problems (according to the bill’s sponsors) as well as Medicaid expansion. Several other states have passed laws that include some of these measures, but North Carolina has more than any other state. They are:

  • Requiring all hospitals to establish a Medical Debt Reduction Policy (MDMP).
  • Submit and publish the hospital’s MDMP.
  • Post quotes online in a usable format using plain language tags.
  • The need for a clear pricing structure to provide a transparent sliding scale of MDMP.
  • Providing rebates for patients between 200% and 400% of the Federal Poverty Level (FPL) and the foreseeable maximum amount that can be charged to those patients during a 12-month period.
  • Require hospitals to provide free care to patients whose household income is less than 200 percent of FPL, which is $55,500 for a family of four in 2022.
  • Requiring hospitals to offer payment plans that last at least two years, with installments not exceeding 5 percent of the patient’s monthly income.
  • Capping annual out-of-pocket costs for most patients at $2,300.
  • Ban on credit reporting unpaid debts within one year of paying the patient’s bill.
  • Capping the maximum interest rate for medical debt at 5% and aligning interest rates to US Treasury yields.
  • Prohibition of foreclosure of houses related to medical debts.
  • Ensuring medical providers are transparent about the levels of charity care available.
  • Protecting family members from medical and nursing home debts incurred by a spouse or parent.
  • Creation of a new private right of action with treble damages.

The question is, what effect will this law or similar bills have on the employer’s treatment plans? The short answer is whether these measures would pass and limit the cost of medical care and limit the collection of unpaid bills, increase the amount of care provided under the hospital’s charitable mission, and make costs more affordable for middle- and low-income families. It may also reduce the costs of employer programs.

However, the opposite effect is equally plausible. Based on previous efforts to cap hospital and other medical costs for a group of patients, hospitals are finding ways to collect these reduced costs from other payers in the system. Historically, this has been the case with employer-sponsored medical plans. Due to the debt collection aspects of the proposal, hospitals may require employer plans to pay directly for services that the hospital cannot collect from the patient. It’s unclear how that could affect employer plans.

The federal government, both legislatively and through regulation, has attempted to lower the cost of health care through the Medicare Plan Transparency Act and the No Surprises Act. These federal rules are directly in employer plans. However, they require insurers and other plan sellers to disclose the cost of medical care to anyone who wants to obtain the information. It also tries to avoid surprises and balance billing by out-of-network urgent care or providers who are not in-network but work at in-network facilities. None of these suggestions have been empirically tested. However, they all have strong theoretical grounds for hoping that they will address the seemingly inexorable rise in health care costs.Untitled design (1)-Aug-17-2022-02-15-48-66-PM

How does medical debt discharge affect employer plans? It’s too early to tell, but perhaps something as comprehensive as North Carolina’s bill, in conjunction with federal law, will have a positive impact on spending. Our one thing It probably can It is expected to lead to confusion and additional administrative complexity. So, we can only hope that in return, the costs will be reduced or at least the same!