CHA News Article

AHA Examines Potential Barriers to Hospitals Paying Insurance Premiums in Health Benefit Exchanges

Through the new health benefit exchanges (or marketplaces) created by the Affordable Care Act, individuals may purchase coverage from participating qualified health plans. Recognizing that an individual’s share of the cost of a premium may be prohibitive, even with a federal subsidy, several hospitals and health systems nationwide have asked whether there are any legal barriers to offering financial assistance to a patient by paying their health insurance premiums. The American Hospital Association (AHA) has issued a legal advisory on the issue, indicating that there appear to be two potential barriers that could affect the ability of hospitals and health systems to offer this type of assistance: anti-kickback laws and federal tax exemption.

The rules, however, are more clear when applied to a hospital participating as a Covered California Certified Enrollment Entity (CEE), as recent regulations adopted by Covered California prohibit a CEE or Certified Enrollment Counselor from paying any part of the premium to or on behalf of an enrollee. These regulations would apply to a hospital that is a CEE.

AHA reports that neither the Internal Revenue Service nor the Department of Health and Human Services’ Office of Inspector General has issued guidance that directly addresses this issue, nor have they expressed an intention to do so in the near term. AHA’s legal advisory provides an analysis of the relevant provisions of the anti-kickback and tax-exemption laws that could pose a barrier, depending on the agencies’ inclinations, based on a hospital or health system directly subsidizing the cost of a patient’s premium. According to AHA, if a hospital or health system makes a contribution to an unrelated charitable organization that subsidizes coverage for those in need, it may well address any potential concerns of the OIG or IRS. AHA will request explicit guidance on these arrangements as well.

Covered California Certified Entity Agreement