The state’s largest health insurer says it has an estimated $20 million a year in “excessive and unnecessary” costs due to nonprofits paying health insurance premiums for patients, some of whom are on dialysis and could be covered by government health plans.

The Hawaii Medical Service Association is changing its policy as of Feb. 1 to ban certain third parties from paying medical premiums.

HMSA said there are about 120 members primarily in individual Affordable Care Act plans whose policies are being paid for by nonprofits such as the American Kidney Fund, which helps dialysis patients in financial need.

“In some instances these folks qualify for government-sponsored health plans — Medicare and Medicaid — but instead are buying through these nonprofits commercial insurance,” which reimburse providers at higher rates than government health plans, said HMSA spokeswoman Elisa Yadao.

HMSA says the $20 million cost is passed on to roughly 18,000 members with Obamacare policies who are facing a 19.8 percent rate hike in 2018. About half of that hike is due to costs associated with patients whose premiums are paid by nonprofits, HMSA said.

“That’s where these excess costs are being generated,” Yadao said.

The American Kidney Fund was the focus of a New York Times investigation in December. The paper reported that the Kidney Fund pushed dialysis centers to donate to the fund.

The Kidney Fund has a deal with the dialysis industry that “allows dialysis clinics to donate to the Kidney Fund, treat patients whose insurance premiums are paid by the charity and then collect money from the insurers for those patients’ treatments — essentially guaranteeing a steady stream of paying customers for the companies,” the newspaper said. “The charity has resisted giving aid to patients at clinics that do not donate money to the fund.”

Tamara Ruggiero, a spokeswoman for the American Kidney Fund, said HMSA’s claims are a distortion of what the charity actually does. The nonprofit — one of the nation’s largest with a budget of more than $250 million a year — provided financial assistance for all types of health coverage, including Medicare and ACA, for about 800 of Hawaii’s 3,600 dialysis patients last year, the majority of whom are on Medicare, the federal program primarily for seniors, and Medicaid for the poor.

“We help patients regardless of whether or not their dialysis provider contributes financially to our nonprofit organization,” she said. “Our only interest is to make sure that kidney patients have access to affordable health care.”

Ruggiero added that 800 Hawaii patients would not have been able to afford health coverage without charitable assistance. The organization is fighting in Congress for patients’ rights to “continue receiving nonprofit assistance to pay their health insurance bills.”

About 40 percent of dialysis clinics with patients receiving financial assistance don’t contribute to the American Kidney Fund, she said.

“Usually in those cases they’re coming to us for that assistance because they already had the plan before kidney failure, and they want to keep it but can’t afford it,” Ruggiero said. “The bottom line is health insurance is supposed to take care of people when they’re healthy and ill. So health insurers using this third-party payment excuse as a way to drop patients they don’t want to pay for anymore is discriminatory and wrong. These are people who are living with various serious health conditions, and without treatment they would die.”

HMSA said that under its new policy it will accept premiums directly from members or their families and employers, government programs, Indian tribes, religious programs and other nonprofits that do not receive money from entities reimbursed by the health plan. HMSA members have until Jan. 31 to find alternative ways to pay their premiums to avoid losing coverage.

“Our primary focus is to make sure that our members continue getting the health care that they need,” Yadao said. “This is a reactive policy change we’re making but also proactive so that we ensure this situation doesn’t happen with another entity. It’s not costing HMSA. It’s costing Hawaii, specifically the 18,000 members we have in ACA plans. They’re bearing the costs across that pool of business.”