Is It a Violation to Help?

by BakerHostetler
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In a May 21, 2014, letter to the President of the American Hospital Association (AHA), U.S. Department of Health and Human Services (HHS) Secretary Kathleen Sebelius confirmed HHS’s position that private, not-for-profit foundations may, within certain parameters, pay for premiums and cost-sharing expenses for enrollees in qualified health plans (QHPs) sold through the health insurance exchanges. Secretary Sebelius’ letter responds to last month’s request from the AHA and the Catholic Health Association of the United States (CHA) seeking “an authoritative statement on which they can rely” that would confirm HHS’s position that it doesn't discourage hospital-affiliated and other charitable foundations from subsidizing premiums for enrollees in QHPs on the exchanges.

This has been a key question that has been raised by providers as they look to address the needs of their patient populations and the conversion between their charity care policies and the availability of insurance in the new marketplaces.

Secretary Sebelius’ letter traces the muddied history of this issue, including previous guidance examined in the Health Law Update, which described a November 4, 2013, Frequently Asked Question (FAQ) issued by the Centers for Medicare and Medicaid Services (CMS) expressing "significant concerns" regarding payment of QHP patient premiums or cost-sharing obligations by hospitals, healthcare providers or other commercial entities. Insurers seized upon this as support for rejecting provider support for third-party premium payments.

CMS released subsequent guidance in the form of a Question and Answer (Q&A) on February 7, 2014, in response to the continued industry confusion and need for clarity. The Q&A clarified that the earlier FAQ did not bar payments by state and federal governmental programs or grantees (such as the Ryan White HIV/AIDS Program), Indian organizations or private charitable foundations. CMS advised that the concerns addressed in the November 4, 2013, FAQ would not apply to payments from private, not-for-profit foundations if the payments are made on behalf of QHP enrollees who satisfy defined criteria that are based on financial status and do not consider enrollees’ health status. CMS would expect that premiums and any cost-sharing payments cover the entire policy year.

On March 19, 2014, an interim final rule was issued, which required QHPs to accept premium and cost-sharing payments from state and federal governmental programs and Indian organizations, and provided much more certainty regarding the use of Ryan White funds, but was clear in its preamble to continue to caution that third party payments of premium and cost sharing provided by hospitals, other healthcare providers and other commercial entities may be problematic. Reiterating concern that such payments “could skew the insurance risk pool and create an unlevel competitive field in the insurance market,” CMS encouraged QHPs to reject such payments. Additionally, CMS stated that the rule does not prevent QHPs from having “contractual prohibitions on accepting payments of premium and cost-sharing from third-party payers other than those specified in this interim final regulation.”

In the May 21 letter, Secretary Sebelius makes HHS’s current position clear, stating:

We believe that existing guidance related to third-party payments of premiums and cost sharing made on behalf of Marketplace QHP enrollees by private, not-for-profit foundations is sufficient to put the public on notice that as a general matter, such payments are not prohibited by HHS’s rules to the extent they are provided in a manner consistent with the February 7, 2014 FAQ.

Secretary Sebelius goes on to advise that HHS does not currently intend to issue additional guidance on this issue.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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