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Hospitals May Assist With Premium Payments for Patients Who Purchase Insurance Through a State or Federal Exchange / Marketplace Without Fear of Anti-Kickback Liability

Health Law Update Sarah E. Coyne, Joseph T. Hanes

CAUTION: MORE RECENT GUIDANCE FROM DHHS SUGGESTS THAT SUBSIDIZING PATIENTS’ PREMIUMS FOR HEALTH PLANS PURCHASED THROUGH THE EXCHANGE MAY NOT BE PERMITTED; SEE OUR MORE RECENT UPDATE HERE.

On October 30, 2013, the Department of Health and Human Services (“DHHS”) issued guidance resolving the question of whether hospitals and health systems may subsidize premiums of patients who have purchased their insurance through a “qualified health plan” (“QHP”) on state or federal insurance exchanges established by the Affordable Care Act.

Under the Affordable Care Act (“ACA”), individuals that meet certain income-based requirements who purchase health insurance from a QHP through an exchange (a.k.a. a health insurance marketplace) generally will be able to obtain subsidies (a.k.a. an advance premium tax credit or APTC) from the federal government toward the cost of their insurance. These individuals also benefit from reduced cost sharing on their coverage. Given the subsidies and reduced cost-sharing, the actual cost of insurance to these individuals can be quite modest.

The affordability of this coverage has prompted hospitals to consider paying premiums for low-income individuals who have trouble paying their premiums, either initially or in order to maintain their insurance coverage. The hospital stands to gain far more in commercial insurance reimbursement for their services than it would pay out in premium assistance. There was widespread concern and no definitive guidance, however, that hospital payment of insurance premiums could violate the Anti-Kickback Statute (“AKS”), which makes it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce or reward referrals of items or services reimbursable by a “federal health care program.” See 42 U.S.C. § 1320a-7b(b).

The concern was that payment of any portion of an individual’s premium that could be made could result in hospital liability for causing “federal health care program” dollars to pay for services to the individual, thus violating the AKS.

DHHS allayed this concern by concluding that the QHPs (and certain other programs related to the exchanges) are not “federal health care programs” for the purposes of the AKS. DHHS explained in a letter to Representative Jim McDermott that this conclusion was reached after a careful analysis of the definition of “federal health care program” in consultation with the Department of Justice.

One note of caution: Although QHPs and related programs are not considered “federal health care programs,” this does not mean they are free from government oversight. DHHS was careful to point out the various oversight regulations and standards applicable to QHPs established under the Affordable Care Act, including provisions allowing for civil monetary penalties against non-compliant plans. In addition to these oversight protections, the Office of the Inspector General (OIG) has the jurisdiction to investigate affairs relating to health exchanges, including potential False Claims Act violations stemming from payments made through or in connection with an exchange.

Nevertheless, this guidance is good news, and will allow hospitals and health systems to take a step toward ensuring that they receive reimbursement for patients who have purchased through an insurance exchange with the major worry (AKS liability) out of the way.

For more information on the Anti-Kickback Statute or the implementation of the Affordable Care Act, contact Sarah Coyne at (608) 283-2435, or your Quarles & Brady attorney.