Overview
Since the U.S. Department of Health and Human Services (“HHS”) announced on October 30, 2013 that it does not consider Qualified Health Plans (“QHPs”) purchased on a federal or state marketplace established under the Affordable Care Act (“Marketplaces”) to be “Federal health care programs,”1 there has been significant debate in the health care industry over whether a hospital or other health care provider can pay an individual’s QHP insurance premiums without violating applicable law. Much of this debate is centered around an FAQ Memo published by CMS on November 4, 20132 (“November Memo”), in which CMS expressed its disapproval of such third-party QHP premium payments.
In the commercial insurance sector, Louisiana Blue Cross and Blue Shield (“LA Blues”) recently announced that effective March 1, 2014, it would not accept QHP insurance premium payments from anyone other than the policy holder or an immediate relative. However, LA Blues recently delayed the implementation of its proposed policy until April 1, 2014, following the issuance of a temporary restraining order (“TRO”) by a U.S. District Court, which prohibited LA Blues and two other insurers from refusing to accept QHP insurance premium payments from the Ryan White HIV/AIDS Program.
Meanwhile, Senator Chuck Grassley (R-IA) has engaged HHS Secretary Kathleen Sebelius in a debate focused on Senator Grassley’s concern that HHS and the Department of Justice (“DOJ”) have not provided a rational basis for the statements in the October 30, 2013 letter to Representative Jim McDermott (D-WA) concluding that QHPs are not federal health care programs. According to Senator Grassley, this conclusion deprives the Marketplace of important fraud and abuse protections intended to apply pursuant to the Affordable Care Act.
The following is a detailed update on the premium support payment debate in progress.
CMS Guidance
In its November Memo, CMS indicated that it had significant concerns with a third-party’s (e.g., a hospital or other provider) payment of an individual’s QHP insurance premiums, because such payments could “skew the insurance risk pool and create an un-level field in the Marketplaces.” The November 2013 Memo states that: (i) HHS has broad authority to regulate the federal and state Marketplaces (e.g., Section 1321(a) of the Affordable Care Act); and (ii) HHS discourages the practice of third-party premium payment and encourages issuers to reject such third-party payments. CMS further stated that it intends to monitor this practice and to take appropriate action, if necessary. The November Memo raised many questions, coming as it did on the heels of HHS’s announcement that it does not consider QHPs to be federal health care programs. Prior to the release of the November Memo, many providers saw HHS’s opinion on the status of QHPs as clearing the way for them to pay QHP insurance premiums for individuals meeting certain defined need-based criteria.
Then, on February 7, 2014, CMS issued a second FAQ Memo3 (“February Memo”) further developing its position on third-party payment of QHP insurance premiums. In the February Memo, CMS specified that the concerns expressed in its November Memo would not arise in connection with payments from: (i) Indian tribes and tribal organizations; (ii) state and federal government programs or grantees (such as the Ryan White HIV/AIDS Program); or (iii) private, not-for-profit foundations if, with respect to payments from such foundations, (a) the payments are made on behalf of individuals who satisfy defined income criteria established by the foundations, and (b) the foundations do not consider an individual’s health status in determining whether the individual qualifies for premium support/cost sharing.
In the February Memo, CMS also stated that it would expect any premium support and/or cost-sharing payments to cover an entire policy year and not to be “episodic” in nature. Although CMS cites no legal or regulatory support for this expectation, presumably, CMS believes that payments covering a full policy year are less likely to skew the insurance risk pool than premium payments that are made on an episodic basis (e.g., one premium payment made in the middle of a hospitalization for a patient who is delinquent on premium payments).
The February Memo qualifies the guidance issued by CMS in the November Memo and provides a mechanism through which a third party can pay an individual’s QHP insurance premium without skewing the insurance risk pool. However, both FAQ Memos are arguably inconsistent with HHS’s position that QHPs are not federal health care programs because if QHPs are not federal health care programs, CMS has no authority to regulate and/or issue guidance related to a third-party’s payment of the insurance premiums.
The LA Blues’ Position on Third-Party Payment
Despite the fact that the February Memo explicitly states that CMS’s concerns in this area do not apply to the Ryan White HIV/AIDS Program (which provides health insurance funding for low income HIV/AIDS patients) and similar third-party entities, LA Blues recently announced that effective March 1, 2014, it would reject all QHP premium payments made by anyone other than the policy holder or an immediate relative of the policy holder. The policy adopted by LA Blues affects all individuals who purchased QHPs from LA Blues and receive premium support payments from third parties to pay the premiums associated therewith, including those individuals who receive premium support payments from grant programs like the Ryan White HIV/AIDS Program. According to LA Blues, this recent policy change is consistent with the advice set forth in CMS’s November Memo, which urges insurers to reject premium payments from anyone other than the QHP enrollee and his/her family members.4 According to Modern Healthcare, LA Blues said its members could still accept grants directly from grant programs and then personally pay their premiums directly to LA Blues.5 In other words, LA Blues will not reject premium payments made by its members even if the members pay such premiums with funds provided to them by grant programs.
In response to LA Blues’ new policy, on February 20, 2014, John East, an individual who would lose his insurance March 1, 2014 under the new LA Blues policy, filed East v. Blue Cross and Blue Shield of Louisiana et al. in the U.S. District Court for the Middle District of Louisiana. East’s complaint asked the Court to issue a TRO against LA Blues and two smaller QHP insurers, Louisiana Health Cooperative, Inc. and Vantage Health Plan, Inc., to stop them from implementing the practice of rejecting third-party premium payments. On February 24, the Court granted East’s motion and entered a TRO enjoining the defendants from “implementing or executing their new policies of refusing Ryan White funds from current or prospective applicants to, or policy holders of, defendants’ health insurance plans.” The following day, the Court vacated the TRO because the insurance plans stipulated that they would continue to accept payment from the Ryan White HIV/AIDS Program on behalf of East and “on behalf of other subscribers similarly situated” through at least April 1. An evidentiary hearing on East’s application for a preliminary injunction is scheduled for March 10, 2014.
In light of the nearly immediate lawsuit filed in response to the LA Blues policy, it remains to be seen if other insurers offering QHPs on the state and federal Marketplaces will follow LA Blues’ example, or if they will be reluctant to adopt such a policy, at least until they see how East’s request for a preliminary injunction is decided by the Court.
Grassley Demands More Information from Sebelius
Unrelated to the debate on third-party premium payments, Senator Grassley has challenged the position set forth in Secretary Sebelius’s letter to Representative McDermott stating that QHPs are not federal health care programs. In a November 7, 2013 letter, Senator Grassley argued that by exempting QHPs from the definition of “Federal health care program,” the administration restricted the government’s use of the Federal Anti-Kickback Statute, which Grassley describes as “a vital tool to investigate and prosecute fraud.” Senator Grassley demanded responses to a series of inquiries into, among other things, the identity of the HHS and DOJ officials who made the decision concerning the status of QHPs and whether DOJ would decline to intervene in qui tam suits related to QHPs and other programs related to the federally-facilitated Marketplaces. Senator Grassley also demanded production of all memoranda, advisory opinions and communications related to this issue.
Although Secretary Sebelius responded to Senator Grassley’s letter on February 7, 2014, Senator Grassley, on February 12, sent a second scathing letter to Secretary Sebelius, chastising her for failing to respond to most of his inquiries.
He wrote:
Although you have now repeatedly referred to the Department’s “careful review” regarding the definition of “federal health care program” and its “assessment of the various aspects of each program,” you have avoided providing any substantive explanation of which aspects of each program support your decision and why.
For example, you failed to address the fact that private health care providers offering qualified health plans to individuals qualifying for federal health care subsidies under PPACA will receive such funds directly from the federal government. Instead, you simply stated that Title I of PPACA models the Marketplaces after the private health insurance market rather than Medicare’s fee for service or Medicare Advantage programs. However, this sidesteps the issue. …
In the midst of adopting a major overhaul to the American health care system, Congress clearly moved to strengthen the anti-kickback statute as applied to PPACA – not to make it irrelevant. Yet your decision [to exempt QHPs from the definition of federal health care program] treats the anti-kickback provision as having no applicability to the rest of the law in which it originated. That would render one provision of PPACA moot as applied to the rest of PPACA, with no evidence whatsoever that Congress intended such an odd result.6
Senator Grassley has requested a response from Secretary Sebelius by March 6, 2014. No response letter from Secretary Sebelius has been made public to date.
Analysis and Practical Takeaways
CMS’s February Memo does not specifically state that an appropriately crafted premium support program operated by a provider through its charity care program will not implicate the concerns identified in its November Memo. However, the February Memo was written broadly enough such that it may be interpreted to permit providers to subsidize premium support payments through private, not-for-profit foundations if the payments are made on behalf of individuals who satisfy defined income criteria established by the foundations, and the foundations do not consider the individual’s health status in determining whether the individual qualifies for premium support. Notwithstanding the foregoing, we note that CMS does not currently appear to have the legal authority to ban or regulate a third party’s payment of an individual’s QHP premiums. As such, while the February Memo is helpful in determining CMS’s position on this issue, it should not be read as an authoritative prohibition on premium support programs structured in a different manner.
A provider looking to establish a premium support program consistent with CMS’s commentary should: (i) utilize defined financial need-based criteria to determine eligibility for the program; (ii) not consider an individual’s health care needs in determining eligibility for the program; (iii) avoid paying premium support on a short-term or episodic basis; (iv) not require the QHP enrollee to obtain health care services from the provider or its affiliates; and (v) work with its charitable foundation or a local independent charitable organization to pay QHP insurance premiums on behalf of qualifying individuals.
Further, given the policy adopted by LA Blues regarding third-party premium support payments, providers wishing to provide premium support and other cost-sharing benefits to QHP enrollees will need to know whether the QHP insurer has a policy in place prohibiting such support payments. For example, a hospital, through its charity care program, may wish to provide premium support to individuals meeting established financial need criteria only to be stymied in its efforts if certain QHP insurers refuse to accept such premium support payments. Stakeholders should watch for the outcome of the LA Blues case as it winds its way through the Federal Courts. If LA Blues’ policy is permanently enjoined by the Court, this may have a ripple effect on other insurers, even in other states.
In conclusion, if your organization is considering the implementation of a premium support and/or cost-sharing program, we urge you to have the program reviewed by your legal counsel for compliance with applicable state and federal law, especially as this particular legal issue evolves. It will also be important to stay tuned on the premium support issue as the key stakeholders in the debate continue to triangulate in on where they will ultimately come down on the premium support issue.
If you have any questions or would like additional information about this topic, please contact:
- Steven C. Hahn at (414) 721-0443 or shahn@hallrender.com;
- Adele Merenstein at (317) 752-4427 or amerenst@hallrender.com;
- Jennifer F. Skeels at (317) 977-1497 or jskeels@hallrender.com;
- David H. Snow at (414) 721-0447 or dsnow@hallrender.com; or
- Your regular Hall Render attorney.
Please visit the Hall Render Blog at http://blogs.hallrender.com/ for more information on topics related to health care law.
1 Letter from Secretary Kathleen Sebelius to Representative Jim McDermott, Oct. 30, 2013, found here.
2 November 4, 2013 Q&A: “Third Party Payments of Premiums for Qualified Health Plans in the Marketplaces,” found here.
3 February 7, 2014 Q&A: “Third Party Payments of Premiums for Qualified Health Plans in the Marketplaces,” here.
4 Joe Carlson, “La. Blue Cross limits HIV/AIDS Patient Access to Premium Aid,” Modern Healthcare, Feb. 18, 2014, available here.
5 Id.
6 Letter from Senator Chuck Grassley to Secretary Kathleen Sebelius, February 12, 2014, available here.
