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Sebelius OKs Foundation Subsidies for QHP Enrollee Premiums

 |  By cclark@healthleadersmedia.com  
   May 23, 2014

Third-party payments of premiums and cost-sharing made on behalf of Marketplace-qualified health plan enrollees by private, not-for-profit foundations are permitted—with some safeguards.

Hospital officials hoping to route financial subsidies to patients struggling with health insurance exchange plan premiums sighed with relief Thursday after HHS Secretary Kathleen Sebelius said in a letter it's okay for them to do so, if they follow certain protocols.


Kathleen Sebelius
Secretary, HHS

But the funds must be transferred to patients through private, not-for-profit foundations, and only for patients selected for their "financial status," not for their health status. Sebelius further said the Centers for Medicare & Medicaid Services "would expect that premium and any cost sharing payments cover the entire policy year."

"We know that even with [federal] subsidies, some people can not afford their premiums, so we've supported ways that foundations can offer assistance with premium payments and make sure those patients keep their coverage," says Jeff Tieman, chief of staff for the 600-hospital Catholic Health Association.

Guidance "that [foundations] are not prohibited from making payments to health plans… gives our members the room to move forward," he says.

Preventing Misconduct
Tieman adds that his organization is "pleased to see that there are safeguards built into it, like not considering a patient's health status and requiring that premiums are covered for a year."

That, he says, "prevents misconduct," in which a hospital or a foundation might use the subsidies to help only the most expensive and sickest patients during an acute episode of care.

The question of whether a private foundation could subsidize exchange plan premiums for patients was muddied by an "FAQ" or frequently asked questions document, in which CMS "expressed its concern regarding support of enrollee premium and cost sharing amounts by hospitals, other healthcare providers, and other commercial entities."

CMS said "this practice could skew the insurance risk pool and create an uneven competitive field in the Marketplaces."

Subsidies issued for less than a year, or issued only to patients with serious conditions more likely to require expensive hospital care, are prohibited because they might be seen as intending to cover the patient to avoid having the hospital absorb uncompensated costs as charity care.

By covering a patient for a whole year, such foundations might also avoid a scenario in which a patient might make an initial payment then stop paying in subsequent months, during which time she might require hospitalization.

In that situation, the health plan would reimburse the hospital for its costs, thinking the patient was insured. But after realizing payments were not made, the payer would void the policy and claw back the hospital payments.

Letters from Rich Umbdenstock, President and CEO of the American Hospital Association and Sister Carol Keehan, CEO of the Catholic Health Association, urged CMS to prohibit health plans from rejecting patients struggling to pay their premiums, as it does under other parts of federal programs.

One example is the federal Ryan White HIV/AIDS program, in which qualified health plans are required "to accept premium and cost-sharing payments made on behalf of enrollees" by the Ryan White program, and "other federal and state government programs that provide premium and cost-sharing support for specific individuals and Indian tribes, tribal organizations, and urban Indian organizations."

In an interim final rule governing third-party payments to QHPs, Umbdenstock's letter said, CMS maintained that its interim rule did not prevent QHPs from having "contractual prohibitions on the acceptance of premium and cost-sharing payments from third-party payers other than those specified in the regulation."

According to Umbdenstock's letter, the interim rule also said CMS would discourage third-party payments by hospitals, other healthcare providers, and other commercial entities, and encourages QHPs to reject such payments."

That left a question open about whether a hospital could give a large grant to a private, non-profit foundation such as a local chapter of the United Way, as some hospitals such as the University of Wisconsin Hospital and Clinics have done or are attempting to do and expect that those organizations would distribute the money to patients who applied and met the requirements.

Hospital Grants to NFP Foundations
The Sebelius letter resolves that issue, saying that hospitals may make such grants. "We believe that existing guidance related to third-party payments of premiums and cost-sharing made on behalf of Marketplace QHP enrollees by private, not-for-profit foundations is sufficient to put the public on notice that as a general matter, such payments are not prohibited by HHS's (the U.S. Department of Health and Human Services) rules to the extent they are provided in a manner consistent with the February 7, 2014 FAQ.

Elizabeth Lietz, spokeswoman for the American Hospital Association said this: "While we are still reviewing the letter, we appreciate the Secretary's confirmation that HHS is not discouraging nonprofit foundations from providing subsidies for those in need, and continue to urge the Secretary to require insurers to accept assistance from hospitals to help those in need."

After seeing the letter, Sandy Erickson of the United Way of Dane County, WI, which received $2 million from the University of Wisconsin Health to distribute to eligible QHP applicants through that region's new HealthConnect program, was relieved as well.

"It appears that HealthConnect, which is based on residence and income eligibility, is exactly what is described as an acceptable premium assistance program," she wrote in an e-mail Thursday.

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