Nov. 19—Recent federal guidance advising hospitals not to pay for low-income patients’ healthcare coverage through the insurance marketplaces does not bar such hospital assistance, according to a legal advisory issued by the American Hospital Association (AHA). However, doubts remain about the practice.

The AHA advisory followed recent conflicting opinions on the practice issued by officials in the U.S. Department of Health and Human Services (HHS). AHA’s legal advisory embraced HHS’s first take on the issue rather than the subsequent guidance provided through the Centers for Medicare & Medicaid Services (CMS) that discouraged hospitals from providing such assistance.

“The Nov. 4 [guidance from CMS] does not alter HHS’s determination that the exchanges and [qualified health plans] are not ‘federal health care programs’ and, therefore, the anti-kickback statute and certain other federal enforcement statutes do not apply,” the AHA advisory stated. “While it undoubtedly was intended to have a chilling effect on the willingness of hospitals to provide insurance subsidies for individuals in need, the [guidance] appears to have no legal force or effect on hospitals (or insurers) and to be unenforceable.”

Enforcement of the Nov. 4 guidance could only come through the issuance of formal regulations, the AHA stated. And it was doubtful whether HHS had the legal authority to issue such rules.

The advisory comes at a time when a growing number are examining whether they can help uninsured patients afford coverage in the government-operated insurance marketplaces created by the Affordable Care Act. Insurers have challenged the practice as a way for hospitals to increase utilization of treatments that financially benefit providers.

In a letter to Rep. Jim McDermott (D-Wash.) on Oct. 30, HHS Secretary Kathleen Sebelius wrote that the federal anti-kickback statute barring assistance to patients covered by federal health programs did not apply to federally subsidized private plans sold under the new federal marketplaces, also known as exchanges.

The apparent result, according to health policy experts, was that the anti-kickback statute would not prohibit hospitals and health systems from subsidizing marketplace policies.

But the Sebelius letter was followed five days later by so-called subregulatory guidance that noted “significant concerns” with hospitals providing insurance subsidies. The guidance, which was issued under a Q & A format, discouraged hospitals from providing the subsidies and insurers from accepting such assistance.

Questions Remain

J. Stuart Showalter, JD, a contributing editor to HFMA’s Legal & Regulatory Forum, said the AHA advisory was merely an opinion in the debate over insurance assistance and might be challenged by fraud-fighting prosecutors.

“Furthermore, in addition to the anti-kickback statute and federal tax laws, there are 50 sets of state fraud laws that must be considered,” Showalter said. “Since these kinds of cases are usually fact-dependent, it is hard to generalize or to predict how a court may ultimately rule.”

The AHA advisory noted that an HHS official told the AHA that the latest HHS guidance did not bar hospitals from providing insurance subsidies through charitable organizations, such as a hospital’s foundation or an insurance assistance not-for-profit organization.

“I agree with the advisory's suggestion that use of hospital-affiliated charitable foundations or other tax-exempt organizations shows promise for achieving the desired result,” Showalter said. “But because ‘the devil is in the details,’ it is recommended that this avenue be explored carefully with experienced legal counsel on a case-by-case basis.”

Publication Date: Tuesday, November 19, 2013