Early Health Care Reform Rules to Benefit Medical Debt Buyers and Collectors

A few health care reform initiatives are set to kick in later this year that will eventually prove positive for medical debt buyers and collectors, according to an ARM stakeholder.

On June 21, Americans who previously were unable to buy health insurance because of preexisting conditions will be able to buy coverage through a temporary high risk pool.  And as early as September, some employers will allow employees to keep or add adult children on their health insurance plans.

A temporary high risk insurance pool covering uninsured people with preexisting conditions was established with $5 billion in funding provided through the Patient Protection and Affordable Care Act, signed by President Obama on March 23, 2010. The law requires that the national pool, which will provide temporary coverage until state-run health insurance exchanges are established in 2014, be open to U.S. citizens and legal residents with preexisting conditions who have not had meaningful coverage for at least six months.

Meanwhile, 10 percent of employers who responded to a Hewitt Associates survey said they will extend coverage early to all eligible adult children before January 1, 2011, when the law takes effect. Nine percent of employers said they will continue coverage for graduating students already covered in their plans, while 4 percent were undecided.

The pending insurance coverage changes are more positive than negative for debt collections in the health care receivables sector. Uninsured patients with preexisting conditions tend to fall into the high-balance self-pay bucket, said Jim Richards, president and chief executive of Capio Partners of Atlanta, Ga. Many of them acquire medical debt because they receive care through emergency rooms, which are billed at a higher rate.

The national high risk insurance pool could potentially move thousands of these patients from the high-balance self-pay pool. But Richards said that’s good for collectors and buyers alike, because the vast majority of those high balance self-pay accounts are uncollectible.

“Most (private pay high balance accounts) go in the hospital through the emergency room and when they see the bill they don’t intend to pay,” Richards said. “Any kind of pool where you pick up insurance and have a smaller portion to pay helps the debt collector.”

Richards said people with health insurance owe less, and as a result, even those in poorer health potentially are more collectible. The same applies to young adults with insurance through a parent’s employer.

To help prepare members for the upcoming changes that will occur through health care reform, ACA International said it provided training to members who collect medical bad debt at its Spring Forum. ACA also provides compliance information through its newsletters and other written communication with health care debt collections professionals.

Richards said he believes the industry also will benefit from having more Medicaid-eligible patients because it will remove those uncollectible accounts from the collection stream, saving debt buyers, and collectors time and money.

“There’s no money in uncollectible accounts,” he said

However, as more uncollectible accounts ease their way out of the system, medical debt will become more expensive, Richard said. But he doesn’t mind.

“I’d much rather work more collectible accounts because they are more profitable,” Richards said.