In a legal advisory to hospitals, the American Hospital Association asserts that the federal government's own regulations "clearly allow for another person or organization to pay the insurance premium for the enrolling individual."
The federal government has no legal authority to prohibit hospitals from paying their patients' insurance exchange premiums to encourage their enrollment, despite a Nov. 4 Centers for Medicare & Medicaid Services statement implying that it does, according to a sharply worded legal advisory from the American Hospital Association.
What's more, there is clearly no prohibition against hospital-affiliated charitable foundations, or unrelated charities, paying these premiums on behalf of patients, the AHA said Wednesday. The financial assistance may be especially helpful to those would-be enrollees whose federal subsidies aren't enough to make coverage affordable.
The AHA offered hospitals guidance on the issue after CMS issued a vaguely-worded and somewhat threatening Q&A about third-party premium payments. The agency said that if healthcare providers such as hospitals pay premiums for their most expensive patients, "HHS has significant concerns with this practice because it could skew the insurance risk pool and create an un-level field in the marketplaces."
"HHS discourages this practice and encourages issuers to reject such third party payments. HHS intends to monitor this practice and to take appropriate action, if necessary."
In its legal advisory, however, AHA said the opinion expressed by CMS it a Nov. 4 Q&A "appears to have no legal force or effect on hospitals [or insurers] and to be unenforceable.
"If HHS wanted to try to make this position enforceable, it would have to go through rulemaking. But even then, HHS's authority to adopt the views expressed in the Q&A is highly questionable. By statute, everyone (except incarcerated individuals and undocumented immigrants) is eligible to purchase any QHP [Qualified Health Plan] offered through an exchange so long as the premium is paid."
The AHA's legal advisory added that the federal government's own regulations implementing the federal premium tax credit "clearly allow for another person or organization to pay the insurance premium for the enrolling individual."
The advisory was issued by the AHA's deputy general counsel Maureen Mudron and senior vice president/general counsel Mindy Hatton.
CMS's Q&A surprised many hospital officials because HHS Secretary Kathleen Sebelius had clearly stated in a letter to Rep. Jim McDermott, (D-WA) that qualified health plans are not federal healthcare programs, and thus are not subject to anti-kickback statutes. There had been concerns that a hospital that attempted to purchase a health exchange premium for a patient might be perceived to—directly or indirectly—influence that patient's choice for where they would get care.
Safety Net Hospitals: 'Not a Green Light'
Even after Sebelius's reassurance, however, hospitals were still uneasy. According to Carl Graziano, spokesman for America's Essential Hospitals, even though the anti-kickback statute was no longer an issue, hospitals were concerned that "there may be other legal barriers to overcome, so [it is] not a green light."
The AHA legal advisory is clear:
"We believe that existing IRS precedent strongly supports a determination that providing this type of subsidy advances the charitable purpose of hospitals and that any benefit to insurers is incidental to achieving the larger public good of making health care available to those with financial need."Providing subsidy support in the name of a charitable contribution, the advisory added, "is especially important for individuals residing in states that have chosen not to expand their Medicaid programs and could help fill the gap in making affordable coverage available to meet the needs in those communities."
Meanwhile, some hospitals have gone ahead and done so through charitable organizations. The University of Wisconsin Hospital and Clinics on Sept. 30 announced that it gave $2 million to United Way of Dane County to help low-income people purchase health plans on the state's exchange. The funds will help some 7,300 people, who now will pay only 2% of their premiums plus some out-of-pocket costs such as deductibles.
America's Health Insurance Plans, the lobby for the insurance industry, could not be reached for a comment.
Who Gets Help with Premiums?
How hospitals or their doctors might decide which patients to cover is the tricky part, and up for debate.
Currently, patients who enroll in health insurance exchanges have to pay their premium bills within 90 days. If they don't, and the hospital or clinic that provided care that was reimbursed, the health plan has the right to "claw back" those funds, in effect reverting the patient to uninsured status. The hospital then may be forced to go after the patient separately, a time-consuming and often unsuccessful effort.
Some have suggested that the precedent has already been set, because government agencies now allow third parties to pay COBRA premiums, for example, as a benefit for employees who voluntary take buyouts from their companies in downsizing strategies.
Some hospital officials have suggested that hospitals, or county health departments that own hospitals and clinics, or other entities might pre-select patients for subsidies based on their history of receiving uncompensated care, especially if their illnesses suggest the likelihood of repeat hospitalizations.
The AHA weighed in that too.
"The ACA requires tax-exempt hospitals to have a written financial assistance policy that describes the criteria that will be applied and the financial assistance that will be provided to help patients afford health care," the AHA legal advisory said. "Premium subsidies could be one form of financial assistance."
If large numbers of hospitals take advantage of this, funding hundreds of their most expensive patients, they may reap major financial benefit. Instead of writing off that care, they will now be paid at health plan rates.