The U.S. Department of Health and Human Services recently announced that Qualified Health Plans (sold on and off the Exchanges) are not “Federal health care programs” for purposes of the federal anti-kickback statute. The agency also issued a subsequent guidance document clarifying that it has “significant concerns” with health care providers supporting enrollee premium payments or cost-sharing obligations for coverage offered on the Exchanges. These announcements have significant practical implications for the activities of insurers, providers and manufacturers.
The U.S. Department of Health and Human Services (HHS) recently announced its determination that Qualified Health Plans (QHPs), whether sold on or off the federal and state-based Exchanges, are not “Federal health care programs” for purposes of the federal anti-kickback statute. The agency also issued a subsequent guidance document clarifying that it has “significant concerns” with health care providers supporting enrollee premium payments or cost-sharing obligations for coverage offered on the Exchanges. These announcements have significant practical implications for insurers, providers and manufacturers.
Specifically, HHS announced last week that premium tax credits, cost-sharing subsidies and other Affordable Care Act (ACA) federal funding mechanisms related to QHPs do not make QHPs “Federal health care programs.” This means the federal anti-kickback statute will not be implicated by financial arrangements involving QHPs because it extends only to inducements involving “Federal health care programs.” HHS’s announcement eliminates the substantial uncertainty that existed regarding whether HHS would seek to extend the anti-kickback statute to QHPs due to the considerable federal funding that will be provided to this market.
HHS made the announcement in an October 30, 2013, letter from HHS Secretary Sebelius to Congressman Jim McDermott (D-WA). Secretary Sebelius stated that HHS’s “conclusion was based upon a careful review of the definition of ‘Federal health care program’ and an assessment of the various aspects of the program under Title I of the Affordable Care Act and consultation with the Department of Justice,” which is responsible for prosecuting anti-kickback violations. The letter does not detail the specific legal basis for the agency’s conclusion.
The Secretary’s conclusion affirms that the coverage sold through the ACA marketplaces is commercial health insurance rather than a government program. Although the federal government provides financial support to purchasers in this market (e.g., through the premium tax credits), and also provides financial protections to issuers to reduce their risks (e.g., through transitional reinsurance payments and risk corridors), the announcement reflects an interpretation that the federal government will not be directly funding health insurance benefits, but will instead be providing indirect financial support to purchasers in the commercial insurance market.
The practical impact for both health insurers and providers is significant for several reasons:
- Commercial marketplace plan/provider financial arrangements. Existing commercial marketplace provider compensation arrangements may not have not been drafted in accordance with the federal anti-kickback statute’s restrictions, and QHPs may rely on those same commercial marketplace provider networks and relationships. An opposite conclusion could have required health insurers and providers to re-examine their existing compensation arrangements. In addition, many health insurers are moving toward compensation models that reward providers for restraining cost growth while maintaining high-quality care. These arrangements can continue to be developed in the commercial health insurance market without federal anti-kickback constraints.
- Provider payments of QHP premiums. Although the announcement appeared to remove a major hurdle for providers that may consider payment of premiums to enroll individuals in QHPs, or to keep them enrolled during a grace period, HHS subsequently released a guidance document on Nov. 4, 2013, indicating that the agency “has significant concerns with this practice because it could skew the insurance risk pool and create an unlevel field in the Marketplaces.” HHS will monitor this practice and “encourages issuers to reject such third party payments.” Other hurdles may continue to apply in addition to HHS’s guidance. For example, in order to prevent adverse selection, coverage in the individual market can only be purchased during an annual open enrollment period, or a special enrollment period in a number of limited circumstances. Moreover, coverage purchased during the annual open enrollment periods will not be effective immediately. Finally, state anti-kickback, insurance and other laws will continue to apply.
- Other benefits to consumers. Pharmaceutical manufacturers, providers and other industry participants that provide coupons to patients or that have policies for waiving co-payments, may presently have different policies for commercially insured patients than for federal health care program patients. The HHS letter confirms that the federal anti-kickback law will not be implicated by these programs as they apply to QHPs, although applicable state laws will continue to apply.
The letter notes, however, that a number of other legal requirements—some of which may not have previously applied to the commercial health insurance market—will apply beginning in 2014 to protect federal funds. For example, the HHS letter reminds issuers that under the ACA, the False Claims Act applies to “payments made by, through, or in connection with an Exchange if the payments include Federal funds.” Providers should be aware that the government will in some cases pay a portion of an individual’s claims costs through the ACA’s cost-sharing subsidies and reinsurance payments. Accordingly, although the federal anti-kickback law will not apply, arrangements involving QHPs will have to be evaluated to determine if they raise a risk of being characterized as causing a false claim or statement.
In addition, HHS 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.