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Not So Fast – Government Cautions Against Third-Party Payment of Premiums for Qualified Health Plans

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

Just days after the federal Department of Health and Human Services (“DHHS”) issued a letter which seemed to sanction third-party premium subsidies for patients who purchase insurance through a health care exchange under the Affordable Care Act (“ACA”), DHHS released new guidance cautioning against that practice. As a result, any hospital or health care provider that seeks to provide premium assistance to patients who purchase insurance through an exchange risks investigation or sanction by the federal government. The government’s position may also mean that issuers of such plans will not accept premium payments from third parties (other than the government).

As we detailed in a previous update (available here), on October 30, 2013, DHHS issued a letter stating that Qualified Health Plans (“QHPs”) and other programs related to state and federal health care exchanges are not “federal health care programs” for the purposes of the Anti-Kickback Statute (“AKS”). This guidance addressed a widespread concern among hospitals and other health care providers regarding implementation of the ACA. That concern was that any premium support they may offer to patients who purchase insurance through an exchange would violate 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). Although the DHHS letter did not expressly sanction such third-party payments, the fact that QHPs are outside the reach of AKS was interpreted by most in the health care community as a tacit authorization of the practice.

In spite of this previous guidance, on November 4, 2013, the Center for Medicare & Medicaid Services (“CMS”) published a Q&A that expressly cautioned against any third-party payment of premiums for QHPs purchased through health care exchanges. The CMS Q&A appears to have been issued as a direct response to the widespread interpretation of the October 30 letter as approving third-party subsidies, stating:

It has been suggested that hospitals, other healthcare providers, and other commercial entities may be considering supporting premium payments and cost-sharing obligations with respect to qualified health plans purchased by patients in the Marketplaces. HHS has significant concerns with this practice because it could skew the insurance risk pool and create and unlevel field in the Marketplaces. HHS discourages this practice and encourages issuers to reject such third party payments. HHS intends to monitor this practice and to take appropriate action, if necessary.

This new guidance is not per se inconsistent with the October 30 letter, which only addressed potential AKS liability. In this new guidance, CMS does not state that third-party subsidies for QHP enrollees could violate AKS, but instead raises general concerns regarding fairness in the Marketplace. In the October 30 letter, DHHS was careful to point out that QHPs are still subject to federal government oversight, and could still be policed on grounds other than AKS. While the CMS Q&A does not say specifically what laws or regulations would potentially be violated by third-party premium subsidies to QHP enrollees, it is clear that DHHS does not approve of the practice. As a result, hospitals or other health care providers who provide premium subsidies, as well as QHP issuers who accept third-party subsidies, risk investigation or sanction by the federal government.

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.