March 21, 2014

Collateral Damage: More on Healthcare Receivables Under the ACA

by Guest Blogger

In a previous post, I wrote about potential looming trouble for lenders that have healthcare receivables as collateral. @KHNews has a more in-depth article on the 30-90 day rule applied to insurers that provide ACA exchange plans.

If an enrollee in an ACA plan fails to pay premiums, the insurer is required to reimburse the doctor for bills incurred in the next 30 days; however, after the 30-day period runs, for the next 60 days the insurer may place claims in suspense until the enrollee catches up his/her premiums (Grace Period). If the enrollee fails to catch up his/her premium payments, the claim(s) can be denied or previously paid claims may even be clawed back by the insurer. In short, doctors could be left with unpaid bills.

At the urging of the American Medical Association (AMA), it seems that at least Washington State has attempted to help physicians with the Grace Period problem by passing legislation requiring ACA plan insurers to provide information regarding an enrollee's payment status.

When a healthcare provider is left with unpaid bills, cash flow decreases. As my previous article points out, lenders that have A/R as collateral should be monitoring it before the accounts become too far delinquent.

What I did not mention in my previous post is that most often debtors tend to pay secured creditors, i.e., lenders, before they pay trade creditors because a lender holding collateral wields a much bigger stick and can act more quickly than an unsecured creditor. With that in mind, those selling goods to healthcare providers should also be concerned about the Grace Period and the potential for decreased cash flow.

Just as with lenders, trade creditors should be keeping a close eye on the accounts of trade debtors that are habitually delinquent in payment. Although the healthcare provider may throw a fit, trade debtors that are several months in arrears may need to pay cash on delivery — or, in non-legal jargon: "no money, no goods."