An obstacle to hospitals covering the insurance costs of their disadvantaged patients was cleared this week by the U.S. Department of Health and Human Services (HHS).

HHS Secretary Kathleen Sebelius stated in a letter to Rep.  Jim McDermott (D-Wash.) that the federal anti-kickback statute barring assistance to patients covered by federal health programs does not apply to those with coverage from private plans sold under the new federal marketplaces, also known as exchanges. 

McDermott had asked HHS about the issue due to concerns that the federal anti-kickback statute could bar those plans from “offering assistance with premiums to persons who are unable to afford their premiums on the exchanges,” according to a statement from his office. 

But hospital advocates said the opinion also eliminated an obstacle to hospitals helping their patients afford health insurance coverage through those marketplaces—a potentially significant issue for hospitals with large uncompensated care populations who are unable to afford the coverage.

“For hospitals, the impact of this opinion is potentially huge,” said Chad Mulvany, director of healthcare finance policy, strategy, and development for HFMA, who along with other hospital advocates had also sought clarification from HHS on the issue.

“There’s an opportunity to do an analysis of all of the charity care and bad debt cases to find individuals who would benefit from having assistance purchasing insurance coverage,” he said.

Hospitals May Benefit

An Oct. 10 legal advisory by the American Hospital Association (AHA) identified the kickback law as a potential obstacle to hospitals providing insurance assistance to their patients.

“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 have asked whether there are any legal barriers to offering financial assistance to a patient by paying their health insurance premiums,” AHA stated in the advisory.

Helping to keep their patients insured could allow hospitals to mitigate financial impact of a rule issued by the Centers for Medicare & Medicaid Services (CMS) that left providers to absorb many costs incurred during a grace period for people with marketplace plans. The CMS rule gave consumers a 90-day grace period after they stop paying their premiums on qualified health plans (QHPs) before an insurer could drop their coverage. And insurers would have to cover only costs incurred during the first 30 days of the grace period.

“This shifts the burden related to patient protections during most of the grace period from [qualified health plans] to healthcare providers,” stated an Aug. 15 letter to CMS from AHA, the Federation of American Hospitals, and the Association of American Medical Colleges.

Unresolved Issues Remain

The HHS letter to McDermott did not address separate tax-exemption issues associated with insurance assistance from hospitals, which also were raised in the AHA legal advisory. And additional legal issues surrounding insurance assistance also remain unresolved.

“That’s probably the correct answer to that narrow question,” J. Stuart Showalter, JD, a contributing editor to HFMA’s Legal & Regulatory Forum, said about the opinion from Sebelius. “But there’s a broader set of issues that need to be addressed before we blindly go ahead and start paying premiums on behalf of patients.”

For instance, it remains unclear whether some states’ anti-kickback statutes still would prohibit hospitals from providing insurance assistance.

The possibility of hospitals helping their patients pay for insurance coverage also drew opposition from the nation's largest health insurance advocacy group.

"Hospitals and drug companies pay patients' premiums and cost-sharing in order to increase utilization of treatments and prescription drugs that benefit them financially," Robert Zirkelbach, a spokesman for America's Health Insurance Plans, said in a written statement. "This practice undermines efforts to reward high-quality, cost-efficient care and drives up health care costs for consumers, employers, and taxpayers."

Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare.  

Publication Date: Thursday, October 31, 2013