Feds Say Health Plans Purchased on Insurance Marketplace Not “Federal Health Care Programs”

… but leave questions unanswered:

On October 30, Secretary of the Department of Health and Human Services Kathleen Sebelius announced that qualified health plans (QHPs) purchased through the Insurance Marketplace are not considered to be “federal health care programs.”

That may allow hospitals and other providers to help patients pay for coverage through the exchanges without violating federal anti-kickback laws, explains attorney Theresa Carnegie of Mintz Levin:

“Prior to [the] announcement, there was considerable debate as to whether QHPs would fall within the definition of ‘federal health care program’ and whether the financial relationships between plans and providers within the Exchanges would be subject to the restrictions of the federal anti-kickback statute.  Sebelius’ letter opens the door for providers, such as hospitals, that are considering paying patient premiums or offering other patient assistance programs, and for the offer of drug copay coupons by pharmaceutical manufacturers within the Exchanges.”

It’s a significant development for both providers and consumers, but it may be too early to celebrate. From lawyers writing on JD Supra:

1.       Providers could be subject to conflicting state laws:

“Case law in many states has established the kinds of relationships which are required for an insurable interest to exist. As a result, state insurance laws may also impact whether providers in a particular state may pay for an individual’s premium subsidies. Providers located near state borders could find themselves dealing with differing state laws on this issue.” (Richard Cowart and Alan Rumph of Baker Donelson)

2.       Non-profit laws may not permit patient assistance:

“For example, a tax exempt hospital should consider the relationship of any premium assistance to its mission and charitable purposes, and structure such assistance to avoid private benefit issues.” (Kristen Blanchette, Dennis Diaz, and Robert Homchick of Davis Wright Tremaine)

3.       The HHS position raises new questions about False Claims Act compliance:

“HS has previously stated that the False Claims Act could apply to individual and small group commercial health insurance due to the federal risk adjustment payments that will be available in 2014.  As a result, the availability of significant federal funding in the commercial health insurance market for the first time raises additional compliance considerations even after HHS’s clarification that the federal anti-kickback statute does not apply.” (Jeremy Earl, Ankur Goel, and Joan Polacheck of McDermott Will & Emery)

4.       Payments may have important tax implications for patients:

“Premium assistance provided to patients may also result in tax liabilities for the patients, and providers may be required to report each patient’s premium assistance amounts on a Form 1099-MISC.” (Kristen Blanchette, Dennis Diaz, and Robert Homchick of Davis Wright Tremaine)

5.       The feds are sending mixed signals about provider payments:

“… a mere five days after the Secretary’s letter … the CMS Center for Consumer Information and Insurance Oversight (CCIO) released a Q&A [that] notes HHS’s ‘significant concerns’ with the possibility of third party payors—such as hospitals, other health care providers, and other commercial entities—making premium and cost-sharing support payments on behalf of patients enrolled in the Marketplace. CMS said its unease with the practice stems from a concern that premium support payments will ‘skew the insurance risk pool and create an unlevel field in the Marketplaces.’ While not stating that premium support payments are banned, CMS stated that it ‘discourages’ the practice and further ‘encourages issuers to reject such third party payments.’” (Julie Kass and William Mathias of Ober|Kaler)

The updates:

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