May providers subsidize the cost of premiums for individuals and families purchasing health insurance on exchanges? The answer is unclear.

In the past week the U.S. Department of Health and Human Services (HHS) released two separate guidance documents that seemingly send mixed messages to providers and payors regarding application of the federal anti-kickback statute (AKS) and payment of premiums for qualified health plans (QHPs) purchased on federal and state-based exchanges (i.e., most new individual and family non-employer insurance products).

An October 30 letter from Secretary Sebelius to U.S. Representative Jim McDermott stated that QHPs – sold on or off the federal or state-based exchanges – are not “Federal health care programs” that would implicate the federal anti-kickback statute (AKS). 

The Secretary’s letter was in response to Representative McDermott’s request that the Secretary clarify whether federal subsidies used to help individuals purchase insurance on exchanges will make those QHPs “Federal health care programs” subject to the AKS and other laws applicable only to Federal health care programs.  After consultation with the Department of Justice, the agency responsible for prosecuting AKS violations, HHS concluded that Affordable Care Act funding assistance provided to individuals or families to subsidize the cost of QHPs (e.g., cost-sharing subsidies and premium tax credits) does not make QHPs “Federal health care programs”. Consequently, financial arrangements regarding QHPs will not implicate the AKS. 

The Secretary’s letter clarified that products sold through exchanges are considered commercial products rather than part of a government program.  The letter appeared to imply that the AKS and other beneficiary inducement laws applicable to “Federal health care programs” would not prohibit providers from paying premiums to enroll individuals in QHPs or keep individuals enrolled during grace periods.

However, on November 4, the Centers for Medicare and Medicaid Services Center for Consumer Information and Insurance Oversight (CCIIO) released an FAQ noting that HHS has “significant concerns” with hospitals, providers, and other commercial entities supporting enrollee premiums and cost-sharing obligations for QHPs purchased on exchanges. According to the CCIIO, this support “could skew the insurance risk pool and create an unlevel playing field” in the exchanges. The FAQ notes that “HHS discourages this practice and encourages issuers to reject third-party payments. HHS intends to monitor this practice and to take appropriate action, if necessary.”