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Speak Now or Forever Hold Your Peace on Third-Party Payment of Marketplace Insurance Premiums

Health Law Alert Sarah E. Coyne

If you spend your days and nights wishing that hospitals could legally pay the premiums of patients for insurance programs offered in state or federal exchanges, you are not alone, and you need to act by mid-September and submit commentary! (Or you can hope that some other articulate folks do so, and have a cup of coffee and read the paper—your choice).

We work with hospitals day in and day out, and it seemed like a wonderful idea to us that hospitals may wish to pay premiums for patients who purchase insurance through a state or federal exchange/marketplace "qualified health plan" or "QHP" (you know, those glitch-free online insurance plans?) so that the patients will have insurance that would cover, among other things, their hospital bills. But as you know, us health care folks cannot take one step forward without doing a little "Is this legally compliant?" dance, and the particular concern was the Anti-Kickback Statute (AKS). By paying a patient's premium, are we paying something of value in exchange for a referral of Medicare or Medicaid beneficiaries? (P.S. to new readers: that would be ILLEGAL).  

Things were looking up on October 30, 2013 when the federal Department of Health and Human Services (DHHS) issued guidance indicating that hospitals would not face exposure under the AKS for doing so, because QHPs are not federal health care programs for the purposes of the AKS. DHHS did not say "Go ahead and do it!" but it seemed that an obstacle had been cleared. Your author joyfully published a giddy client alert on the topic, but then when she was basking in the Arizona sun a few days later, she received a call from her trusty colleague saying that (GASP!), the federal government was changing its position!!!! (Say it ain't so!). It was true: On November 4, 2013 the Centers for Medicare and Medicaid Services (CMS) issued guidance expressly cautioning against any third-party payment of premiums for QHPs purchased through health care exchanges. Sad but true: Your author had no more fun in Arizona and instead wrote another client alert that was not nearly as giddy, available here.  Actually, her trusty colleague wrote most of it, which you can tell by the fact that it is not the least bit funny. But she still wishes for you to feel sorry for her, because her time in Arizona was now clouded with disappointment. 

CMS did not explicitly say what law would be violated by this practice, but made it clear that the practice was discouraged and that QHP issuers could get in trouble for it.

Fast forward now to August 18, 2016—CMS addressed the concern of inappropriate steering of Medicare and Medicaid beneficiaries into the health care exchanges/marketplaces by issuing a request for information asking for comments on this practice and what can be done about it. CMS also sent letters to all Medicare-enrolled dialysis centers describing the concern.

CMS is concerned that the private plans issuing the QHPs offer higher rates than Medicare or Medicaid, and that hospitals (or other third-party payors) are attempting to make more money (rather than just attempting to be paid at all). CMS is concerned that by paying premiums for individuals who are already Medicare/Medicaid beneficiaries and who have particularly high cost health care needs, third-party payors such as hospitals will negatively affect the individual market risk pool and drive up claims costs for insurers and, ultimately, enrollees. CMS is also concerned that these patients will experience a disruption in care, and could receive advance premium tax credits for which they are actually not eligible, and which they may be forced to repay upon filing their tax returns. 

This is an interesting dilemma because federal law typically does not preclude third-party payment for premiums or cost sharing. The CMS request for information contains many detailed questions, including descriptions of whether the practice is happening now, how enrollees are affected, what remedies could deter this practice, whether this practice tends to be associated with bad care, and whether CMS should require providers to report this practice. The full document is available here and the letter sent to dialysis centers is available here.

What does your author plan to do about it? She certainly does not plan to go to Arizona because it is AUGUST. But she will be watching carefully for developments in this long and winding road and will update you when they occur!

For questions, please contact Sarah Coyne at (608) 283-2435/, or your Quarles & Brady attorney.