Since the passage of the Affordable Care Act (ACA), the payment of healthcare premiums by third parties has been the subject of controversy. As Congress develops its plan to repeal and replace the ACA, it is uncertain how third-party premium payments will play out. While some view it as a charitable means to address exigent situations, others view it as a serious threat to the stability of the ACA's risk pools.
In October 2013, the Department of Health & Human Services (HHS) determined that health plans sold in the individual market are not "Federal healthcare programs" and therefore not subject to the federal antikickback statute that prohibits the exchange of anything of value in an effort to induce the referral of federal healthcare program business. The antikickback statute generally prohibits healthcare providers, pharmaceutical manufacturers and other interested parties from directly paying enrollees' Medicare or Medicaid premiums or other cost-sharing.
HHS's conclusion that the antikickback statute did not apply to the individual market appeared to be an invitation for these types of premium and cost-sharing assistance payments. However, the following month HHS issued guidance encouraging insurers to reject third-party premium payments from hospitals, healthcare providers and commercial entities due to "significant concerns" that allowing third-party payment arrangements could skew the insurance risk pool and create an uneven field in the exchange marketplace. These concerns apply equally to risk pools in the commercial marketplace.
In response to this guidance, several charitable organizations cried foul. HHS then revisited the issue in February 2014 and clarified that insurers should accept premium and cost-sharing payments from certain federal and state government programs, Indian tribes, and tribal organizations. HHS also clarified that the concerns cited in November 2013 were inapplicable to private, not-for-profit foundations, provided that those foundations rendered premium assistance based upon financial status and did not consider health status, as well as that they provided financial assistance for the entire policy year.
Controversy: Steering Patients to Health Insurance Marketplace Plans
What if a private, not-for-profit foundation satisfied HHS's guidelines but received all of its funding from healthcare providers? And what if those same healthcare providers referred Medicare and Medicaid patients to their affiliated foundations for financial assistance in an effort to steer those patients to private health plans so they could get paid more for providing the same services?
Steering Medicare and Medicaid patients to ACA plans is precisely the conduct alleged in a federal lawsuit brought by UnitedHealthcare of Florida (United) against American Renal Associates Holdings Inc., currently pending in the United States District Court, Southern District of Florida (Case No. 9:16-cv-81180-KAM). In that case, United alleges that American Renal Associates engaged in a fraudulent scheme to convince Medicare and Medicaid dialysis patients to drop their government insurance and sign up for United plans, and allegedly referred patients to a charitable foundation to help pay their premiums. The charity at issue, the American Kidney Fund, maintains a program for paying dialysis patients' premiums which is funded by dialysis providers.
According to the complaint, American Renal Associates' scheme was purely profit-driven—while American Renal Associates received $300 or less per dialysis session from government payers, it billed United $4,000 per session. American Renal Associates denies the allegations in the complaint.
If true, the alleged conduct presents a potential conflict of interest. Dialysis providers contribute to the charity, the charity provides financial assistance so dialysis patients covered by Medicare and Medicaid can obtain private insurance, and the dialysis providers' reimbursement for treating those same patients increases. This conduct can undermine the insurance risk pool. When a third party pays the premiums only for people in poor health, the insurance pool skews toward people who need more expensive healthcare, and everyone pays more.
CMS Information Request Highlights Concerns
In August 2016, the Centers for Medicare and Medicaid Services (CMS) issued a request for information seeking public comment regarding inappropriate steering by providers and provider-affiliated organizations of Medicare and Medicaid patients to individual market plans for the purpose of seeking higher reimbursement rates. In its request for information, CMS expressed concern that such practices "not only could raise overall health system costs, but could potentially be harmful to patient care and service coordination because of changes to provider networks and drug formularies, result in higher out-of-pocket costs for enrollees, and have a negative impact on the individual market single risk pool."
CMS Issues Interim Final Rule
In response to its August 2016 request for information, CMS received over 800 public comments, and on December 12, 2016, CMS issued regulations in the form of an interim final rule barring renal dialysis facilities from making premium payments for individual market health plans without (1) disclosing to the insurer that a third-party payment will be made, and (2) obtaining assurance from the insurer that third-party payments will be accepted.
The story, however, continues.
Federal Court Blocks CMS Regulations
A federal court in Texas blocked the CMS regulations that were set to go into effect on January 13, 2017. In granting a preliminary injunction, the court found that CMS bypassed—without good cause—notice and comment periods required under the Administrative Procedures Act. So, for now, the CMS regulations cannot be enforced.
While the antikickback statute does not currently apply to health plans sold on the individual market, that could change. The current draft of the American Health Care Act of 2017 (AHCA) being considered in the House of Representatives provides that any programs that receive certain federal grant funding would be subject to the antikickback statute, and under AHCA those grants would most likely support the individual market. We will have to wait and see how this unfolds under the new administration. Whatever the future holds, the issue of third-party payment of premiums cannot be ignored. The right solution should carefully balance the legitimate interests of patients, providers and insurers, while protecting the risk pools of all healthcare markets.