A loophole in California's upcoming health care overhaul could be exploited by families gaming the system or responding to hardship in a way that doctors say could leave a pile of unpaid bills.
A chain of events would create a two-month period during which a family has medical coverage but no insurer must pay its claims.
Nonpayment of premiums for subsidized policies would trigger the oddity: Federal law provides a three-month grace period before cancellation - but insurers are responsible only for the first month.
Doctors say the liability might keep many physicians from participating in next year's program. A single prostate cancer patient's course of treatment can cost $93,000, they say.
"I do think there's legitimacy to their concerns," said Diana Dooley, head of the state Health and Human Services Agency and a trustee of Covered California, which is implementing the state's health care overhaul.
"At this point, it's speculation about how much of a problem it might be," she said.
Dooley said the state has discussed doctors' concerns with the federal government but that U.S. law provides no flexibility in the matter.
The U.S. Department of Health and Human Services, in written comments, conceded that nonpayment of premiums would "increase uncertainty for providers and increase the burden of uncompensated care." But it rejected a handful of proposals for cracking down on families whose policies lapse.
"HHS will monitor this issue moving forward and will continue to work on the development of policies to prevent misuse of the grace period," HHS said in comments placed in the Federal Register.
The federal law sparking the controversy was meant to make it easier for families with low or moderate incomes to buy health insurance and harder to strip them of it for failing to pay premiums.
Families obtaining a subsidized policy qualify for the three-month grace period after paying at least one month's premium.
Hardship ranging from job loss to divorce could spark nonpayment but so could a desire to game the system.
Families whose policies are canceled for missing payments are not barred from simply buying another one during the next annual enrollment period. They would face a tax penalty, but no repayment requirement, no fine, no increase in cost of premium, and no ban on receiving a new subsidy.
During the three-month grace period, insurers are required to pay claims for the first month, after which policyholders would be asked to pay their doctor's bill or their insurance premium. If they pay neither, doctors get stuck with the tab.
"It could be very problematic, even to the extent that it may cause some physicians to have to close their practice," said Dr. Paul R. Phinney, president of the California Medical Association.
Covered California contends that the nation's health care overhaul obligates doctors to provide any essential or timely care necessary during the full three-month grace period, regardless of any delinquency in paying premiums, according to spokesman Dana Howard.
Other health care experts say the mandate on doctors is implied but not explicit. Nonetheless, Phinney said, doctors feel a moral responsibility to provide care - and case law provides precedent against patient dumping.
"If you're my patient, you're in my office, you have a medical problem that you're worried about, we have a relationship, you need care - I can't say, 'Well, you didn't pay your bill, sorry, come back after you've paid it,' " Phinney said.
The three-month grace period for subsidized policies next year will be three times longer than California's current standard.
Leah Newkirk, of the California Academy of Family Physicians, said the threat of loss is particularly acute for small or struggling practices.
"I think in particular it will impact providers in rural areas and providers who are seeing disadvantaged populations, sort of precisely the people we want to encourage to (buy policies)," Newkirk said.
Covered California does not expect doctors to suffer significant loss because subsidies will make policies affordable enough to ease the threat of three-month delinquencies, families want coverage and are not seeking to game the system, and anyone who stopped paying premiums would remain subject to traditional bill-collection practices, Howard said.
"There is some additional risk; we just don't think that it's a significant or substantial risk," Howard said.
Consumer advocates say that a three-month grace period makes sense for the estimated 2.6 million low- and moderate-income people who are expected to buy policies through Covered California. Subsidies are available on a sliding scale, extending to a family of four earning about $92,000.
"I think we certainly appreciate the providers' concerns, but at the same time, we also don't want to have a situation where people are being dropped from coverage and facing huge medical bills for basically being a month or two late for payment," said Anthony Wright of Health Access California.
Betsy Imholz, of Consumers Union, said it's "far-fetched" that many low-income families would research federal regulations to intentionally game the system. "Most people don't even have time to read their mail," she said. "It's highly unlikely."
Subsidized policies sparking the controversy are a linchpin in next year's health care changes. Using a carrot-and-stick approach, the federal government is requiring nearly all Americans to have health coverage or pay a fine.
Covered California cannot alter the three-month grace period for canceling subsidized policies, but it has tried to ease the impact on physicians by requiring insurers to provide notification when policyholders are late in paying premiums, Dooley said.
Doctors must be informed of delinquencies between the 30th and 45th days of the three-month grace period - in other words, within 15 days after insurers no longer are obligated to pay claims.
Even if that notification works perfectly, however, it does not remove doctors' fiscal risk and it retains a two-week window in which they could be providing care without knowing insurance is in limbo.
"Doctors are still on the hook," said Phinney of CMA, who labeled it a "good-faith attempt" but added: "It really doesn't solve the problem."
Call Jim Sanders, Bee Capitol Bureau, (916) 326-5538. Follow him on Twitter @jwsanders55.