Feb. 14—Healthcare foundations can pay for coverage by insurance plans offered on new government-run marketplaces, according to recent federal guidance.

The 2014 launch of health insurance marketplaces, which were created by the Affordable Care Act, has increased the interest of hospitals and health systems in helping their patients afford either the premiums or out-of-pocket costs of such plans. But the push to provide financial assistance has run into mixed messages from federal agencies about whether the practice is allowed under either federal law or regulations.

In the latest guidance on the issue, the Centers for Medicare & Medicaid Services (CMS) clarified that payments are allowed by a private, nonprofit foundations for marketplace enrollees who are selected for assistance based on their financial needs. Insurance financial assistance may not be based on the health status of marketplace plan enrollees, according to guidance. Additionally, such financial help should cover premium and cost-sharing costs for the entire policy year.

The latest CMS statement followed conflicting opinions on the practice issued late last year by officials in the U.S. Department of Health and Human Services (HHS). In an Oct. 30 letter to a member of Congress, 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 by Nov. 4 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.

The latest guidance issued on Feb. 7 stated that CMS did not intend the concerns it raised with hospital payments to apply to private, not-for-profit foundation payments of premiums and cost sharing for exchange enrollees.

Long-standing Practice

For many years, hospitals have used payments to foundations to provide financial assistance for local residents using residency and income-based qualifications to ensure the provider was not directly benefitting from the payments. Other arrangements have included hospitals donating to financial assistance programs operated by other types of independent not-for-profit organizations.

Insurers have raised concerns that such assistance can create conflicts of interest because hospitals could directly financially benefit from helping high-cost uninsured patients afford insurance coverage.   

The latest guidance also followed a November 2013 legal advisory by American Hospital Association that concluded federal guidance advising hospitals not to pay for low-income patients’ healthcare coverage through the insurance marketplaces was not sufficient to bar such assistance. 

HFMA is seeking additional clarification on the legal limits of exchange plan financial assistance from the HHS Office of Inspector General.


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

Publication Date: Friday, February 14, 2014