(New throughout; adds latest court ruling, Blue Cross, Lambda comments)
By Julie Steenhuysen
CHICAGO, Feb 25 (Reuters) - Blue Cross and Blue Shield of Louisiana and two smaller insurers will delay implementing policies to stop poor HIV patients from paying for Obamacare plans with funds from the federal Ryan White HIV/AIDS assistance program.
The decision, which the insurers revealed at a federal court hearing on Tuesday, prompted the judge to lift a temporary restraining order that forced them to delay the change in policy for 14 days.
On Monday, Brian Jackson, chief judge of the U.S. District Court for the Middle District of Louisiana, issued the order that would have compelled the companies to accept Ryan White funds to pay insurance premiums on behalf of HIV patients.
HIV advocates called the ruling a victory because the companies will now continue to accept payments using federal funds until March 31, three weeks after the date the temporary restraining order would have expired.
"This is an important first step in preserving critical health insurance coverage for low-income individuals living with HIV and in halting the deliberate insurance industry practice of discriminating against people with HIV in general," said Scott Schoettes, senior attorney and HIV Project Director at Lambda Legal. The nonprofit group brought the lawsuit on behalf of John East, a part-time worker in the hospitality industry, and other low-income Louisianans living with HIV.
Jackson has scheduled a March 10 hearing for a preliminary injunction to require the insurers to continue accepting the payments for the duration of the litigation.
The insurers named in the case are Blue Cross and Blue Shield of Louisiana, Vantage Health Plan and Louisiana Health Cooperative. They are among a small handful of insurance companies in Louisiana that sell healthcare policies under President Barack Obama's healthcare law.
Without an injunction, low-income individuals with HIV who elect to stay in one of the plans offered by the three insurers will need to pay their own healthcare premiums after March 31.
For more than two decades, poor people with HIV have used funds from the federal Ryan White HIV/AIDS Program to buy health insurance they could not otherwise afford.
But earlier this month, Blue Cross and Blue Shield of Louisiana began rejecting Ryan White payments sent on behalf of HIV patients who had enrolled in one of its Obamacare plans. Subsequently, the two smaller insurers followed suit.
The insurers told healthcare advocates that guidance issued by the Centers for Medicare and Medicaid Services, the lead Obamacare agency, prevented them from accepting third-party payments for the new health plans, even when the funds came from a government program.
Earlier this month, the CMS said that guidance did not apply to the Ryan White program. The federal agency also said it is considering amending rules to require issuers to accept Ryan White payments.
Louisiana Blue, which had planned to stop honoring Ryan White and other third-party payments for premiums as of March 1, said in a statement on Tuesday it will hold off on that policy until March 31.
John Maginnis, a spokesman for Blue Cross and Blue Shield of Louisiana, said in a statement that extending the deadline "gives people more time to shop for the right healthcare plan for themselves and their families in the Marketplace, including finding out whether they may be eligible for a subsidy, or tax credit, to help them pay the cost of their healthcare premiums."
The company will honor all premium payments, including those received from third parties, such as the Ryan White program, through March 31, Maginnis said.
After that, individual policy holders will have to submit their monthly payments directly.
"We are working to let our individual policyholders know about this forthcoming requirement, giving them more time to prepare and shop for plans in the Marketplace while enrollment is still open, if they are eligible," he said.
Insurance experts point out that once one carrier in a market institutes policies that drive away potentially high-cost customers such as people with HIV-AIDS, other carriers feel pressure to do the same for fear of being the only one to cover them, a situation called adverse selection.
Earlier this month, Lambda Legal filed an administrative complaint with the Office of Civil Rights of the U.S. Department of Health and Human Services, CMS's parent agency, against Louisiana Blue, Vantage and Louisiana Health Cooperative, arguing that their refusal to accept Ryan White payments flouted a key provision of the ACA, namely its requirement that insurers accept any customer regardless of health status.
(Reporting by Julie Steenhuysen in Chicago; Additional reporting by Sharon Begley in New York; Editing by Jan Paschal and Richard Chang)
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