CHA News Article

AHA Issues Legal Advisory on Third-Party Premium Payments in Marketplaces

The American Hospital Association (AHA) has issued a legal advisory regarding the U.S. Department of Health and Human Services (HHS) recent statements about hospitals and health systems that wish to subsidize premiums for health plans purchased on the health insurance exchanges for individuals in need of assistance. First, in an Oct. 30 letter to Rep. Jim McDermott (D-WA), HHS clarified that the federal anti-kickback statute (AKS) does not apply to qualified health plans (QHPs) because QHPs and other programs related to federal or state health exchanges are not “federal health care programs.” Consequently, the AKS does not affect the ability of hospitals or health systems to offer these types of subsidies. However, in a question-and-answer document issued on Nov. 4 regarding third-party payments of premiums for QHPs, HHS said it has “significant concerns” with these types of subsidies and it “discourages this practice and encourages issuers to reject such third party payments.” According to AHA, the Nov. 4 Q&A does not alter HHS’s determination that the exchanges and QHPs are not “federal health care programs” and, therefore, the AKS and certain other federal enforcement statutes do not apply. 

In its legal advisory AHA states, “While HHS may have broad authority to issue regulations to set standards for the offering of QHPs through the exchanges and ‘such other requirements as the Secretary [of HHS] determines appropriate,’ its attempt to discourage hospitals from offering premium subsidies finds no support in the ACA statute or regulations. The Q&A appears to have no legal force or effect on hospitals (or insurers) and to be unenforceable. Even if HHS has the authority to establish a policy either preventing hospitals from providing premium assistance to uninsured individuals, or permitting insurers to reject enrollees who received such assistance, it could do so only through regulation… Even if HHS went through the rulemaking process, it is far from clear that HHS could justify either of the policies described above.”

According to the legal advisory, the regulations implementing the federal premium tax subsidy clearly contemplate that, in many cases, another person or organization might pay the premium for an individual to enroll in a QHP. For purposes of determining whether an individual is eligible for a federal premium tax credit for a given month, the regulations provide that premiums paid by “another person,” such as by another individual or by an Indian tribe, are treated as “paid by the [enrollee].” A hospital would still need to ensure that its involvement in the process of assisting a patient to enroll in a QHP is consistent with federal and state law including health privacy and conflict of interest rules.

Lastly, AHA notes that the Q&A does not express concerns about other charitable organizations providing premium subsidies to the uninsured. The views expressed in the Q&A apply to third-party payments offered by only “hospitals, other healthcare providers, and other commercial entities.” As a result, the Q&A would not apply to hospital-affiliated charitable foundations and unrelated charitable organizations that wish to offer this type of premium assistance as part of their mission. Hospitals should seek the advice of legal counsel.

The advisory is an update to the Legal Advisory on subsidies issued Oct. 10.