Hospitals Paying Patient's Insurance Premiums--Is It the Right Thing to Do?

While it makes fiscal sense from a reimbursement standpoint, should hospitals engage in the practice of paying a patient’s health insurance premiums?

Over on Forbes.com, I write about a recent article in HealthLeaders Media which reported that this very topic came up during a webinar hosted by the American Hospital Association. AHA President Rich Umbdenstock posed the question to Mandy Cohen, senior advisor at the Centers for Medicare & Medicaid Services, who did not know the answer.

One concern that has been raised with the practice is that it might violate federal kickback statutes, but a recent letter from Secretary of Health and Human Services Kathleen Sebelius to Rep. Jim McDermott (D-Wash.) indicates that as long as federal funds are not used the practice is not illegal. There may be other state or federal laws that might prohibit hospitals from contributing to patient health insurance premiums as well.

As I found out this past summer at the Healthcare Financial Management Association annual conference, hospitals already do this. One of the speakers told how her hospital had paid COBRA for one patient, and then by asking around, I found another healthcare executive who said his hospital had done it as well. I did not get the impression the practice was widespread. However, it might be more prevalent then I thought, because when I called a representative of the health insurance industry they had a prepared statement ready, decrying the practice.

Whether the practice is legal or not remains to be seen. But AHA President Umbdenstock brought the question out into the open. CMS’s Cohen promised she would check with the agency’s lawyers with an answer. The bigger question, of course, is not whether it’s legal or not, but is it the right thing to do?