August 1, 1997

SUBJECT: Third Party Liability Issues Under HealthChoices

TO: Ms. Patricia Jacobs

FROM: Suzanne Love

This responds to your memo of May 19, 1997, requesting clarificati on regarding liability for cost sharing expenses (deductibles and coinsur ance) when a Medical Assistance (MA) recipient is enrolled in an MA manag ed care organization (MCO) (either mandatory or voluntary) and has a thir d party medical resource through private coverage under a commercial MCO.

Section 1902(a)(25) of the Social Security Act requires the Department to take all reasonable measures to identify legally liable third parties (TPL) and treat verified TPL as a resource of the MA recipient. 55 Pa. C ode Chapter 1101, Section 1101.64(a), and Part 11, Section PA. of the Hea lthChoices contract (in instances where the plan is a HealthChoices MCO) require that the Department's TPL Section or the Department's contractor be responsible to ensure that the Commonwealth is the payor of last resor t when third party resources are available to cover the costs of medical services provided to MA recipients.

Section 1101.64(a) also permits the third party resource to bill for c ost sharing requirements such as deductibles and coinsurance when the amo unt of payment by the third party resource is less than the Department's fee or rate.

As more individuals are enrolling in a variety of commercial managed c are organizations for their private health insurance, the issue of TPL an d liability for cost sharing becomes more complex as evidenced by the var iety of scenarios in the examples submitted by you and your staff.

The Bureau of Program Policy and Service Development is committed to p roviding you with a complete response to your request for clarification a s soon as possible. In the interim, we are providing a partial response a nd request that you share this clarification with all plans, both mandato ry and voluntary, until we are able to provide full resolution of this co mplex issue.


When an MA recipient is enrolled in an MA managed care plan and al so has private, commercial third party coverage in the same plan, the net work provider who renders a medical service to the recipient under the pr ivate, commercial plan may not impose any cost sharing requirements on th e MA recipient. In this situation, the plan is receiving a capitated rate from both the private, commercial payor and MA. Although the service was rendered under the private, commercial plan, the capitated rate paid to the plan by the Department through the MA Program shall be considered pay ment in full. If the network provider is enrolled in MA, the rate paid to the provider constitutes the cost sharing amounts (deductible and coinsu rance). This is consistent with Section 1101.63(a) which requires that a provider accept as payment in full, the amounts paid by the Department, i n this case the managed care plan. If the network provider is not enrolle d in MA, the plan and the non-MA enrolled provider are responsible for re solving liability for recipient cost sharing.

Section 1101.63(a) also requires providers who seek or accept suppleme ntary payment of another kind from the recipient for a compensable servic e to return the supplementary payment. Therefore, plans must inform their providers that any provider who imposed and collected a deductible or co insurance from an MA recipient enrolled in the same plan as both a privat e, commercial member and an MA member must return the payment to the reci pient.

I hope that this partial response is helpful until we are able to addr ess all of the various scenarios identified in your examples. If you have any further questions regarding this partial response, or any additional information, please let me know.