FPL Risk Transfer Strategy

When I described the strategy to a fellow insurance consultant he asked “Bill, this is very interesting, when did you learn about this?” “About 24 hours ago” I responded.

Doug Aldeen (doug@health-attorney.net) an Austin based ERISA attorney has shared with us an interesting risk transfer strategy we believe is worth exploring.

When I described the strategy to a fellow insurance consultant he asked “Bill, this is very interesting, how long have you known about this?” “About 24 hours ago” I responded.

Hospitals financial assistance programs, although not uniform, provide discounts averaging 60-100% off billed charges for those patients who qualify. Financial assistance programs are tied to the Federal Poverty Level anywhere from 200% to 500% FPL.

Federal Poverty Level Calculator: https://home.mycoverageplan.com/fpl.html

For example, a household of 1 earning $45,000 (349% FPL) and would qualify for an 80% discount off billed charges at Baylor Scott & White. A household of 1 earning $25,000 (194% FPL) would qualify for free care at Baylor Scott & White.

A plan sponsor can take advantage of these financial assistance programs in the same fashion as many are doing with their prescription drug benefits (transferring specialty drug risk to manufacturers assistance programs).

A plan can be structured to pay excess benefits in cases where financial assistance programs are available. In the example above of a single household earning $45,000, the plan would only be at risk for a portion of 40% of billed charges (plan allowed amount can be limited to a % of Medicare).


UNDER PLAN LIMITATIONS AND EXCLUSIONS: In the event that the member qualifies either in whole or in part for financial assistance, the plan will pay secondary subject to the facility’s financial assistance policy.

Internal Revenue Code 501R

A hospital facility must provide written notice that indicates that financial assistance is available for eligible individuals, identifies the Extraordinary Collection Attempts (ECA) that the hospital facility (or other authorized party) intends to initiate to obtain payment for the care, and states a deadline after which such ECA(s) may be initiated that is no earlier than 30 days after the date that the written notice is provided.

Finally, the hospital facility must take all reasonably available measures to reverse any ECA (with the exception of certain debt sales) taken against the individual to obtain payment for the care.  Such reasonably available measures generally include, but are not limited to, measures to vacate any judgment against the individual, lift any levy or lien (with certain exceptions) on an individual’s property, and remove from the individual’s credit report any adverse information that was reported to a consumer reporting agency or credit bureau.


Section 501(r)(5) does not distinguish between insured and uninsured Financial Assistance Policy (FAP) eligible individuals. The Amount Generally Billed (AGB) limitation applies to all individuals eligible for assistance under the hospital facility’s FAP, without specific reference to the individual’s insurance status.


Examples of Hospital Financial Assistance Policies


Medically Indigent Definitions:

“Medically Indigent” means a patient whose medical or hospital bills from all BSWH related providers, after payment by all third parties, exceed 5 percent of his or her Yearly Household Income, whose Yearly Household Income is greater than 200 percent

“Financially Indigent” means a patient whose Yearly Household Income is less than or equal to 200 percent of the Federal Poverty Guidelines (“FPG”). These Financially Indigent patients are eligible for a 100 percent discount on outstanding patient

Qualifying patients with family incomes ranging from greater than 200% up to 500% of Federal Poverty Guildline (FPG), with Baylor Scott & White medical bills equal to or greater than 5% of their yearly income, are eligible to pay a discounted amount that is the lesser of the patient’s account balance or 10% of gross charges.

BSW College Station Policy:

Microsoft Word – Plain Language Summary Financial Assistance Policy – English (bswhealth.com)

Baylor Scott & White service area:  Patients living in the counties listed below are eligible for financial assistance for non-emergency, medically necessary care. Anderson Burnet Denton Hays Kaufman Navarro Smith Waller Bell Collin Ellis Henderson Llano Parker Tarrant Washington Blanco Cooke Grayson Hood McLennan Rockwall Travis Williamson Brazos Coryell Gregg Hunt Milam San Saba Van Zandt Wood Burleson Dallas Grimes Johnson School districts in these areas should direct care to Scott & White hospital facilities


SOURCE: (www.bhset.net.)

Up to 200% of FPG                                100% of outstanding balance

Up to 250% of FPG                                90% of outstanding balance

Up to 300% of FPG                                80% of outstanding balance

Up to 350% of FPG                                70% of outstanding balance

Up to 350% of FPG                               60% of outstanding balance

RiskManagers.us is a specialty company in the benefits market that, while not an insurance company, works directly with health entities, medical providers, and businesses to identify and develop cost effective benefits packages, emphasizing transparency and fairness in direct reimbursement compensation methods.