November 21, 2013

Applicability of Fraud and Abuse Rules to the Marketplace Clarified … Somewhat

One of the lingering questions about the Health Insurance Marketplace created under the Affordable Care Act is whether plans on the Marketplace are considered part of a Federal health care program, thus opening up potential liability under the Anti-Kickback Statute. There was concern that the broad language defining a “Federal health care program” would apply to the Exchanges because of the federal tax subsidizes provided to individuals on the private market.  Under 42 U.S.C. 1320a-7b(f)(1), a “Federal health care program” is defined as “any plan or program that provides health benefits, whether directly, through insurance, or otherwise, which is funded directly, in whole or in part, by the United States Government.”  This presented the possibility that, by virtue of the inclusion of federal subsidy payments, even private insurance plans on the Marketplace and the state Exchanges would constitute Federal health care programs and necessitate compliance with the entire array of federal legal requirements.   In an effort to address these concerns, the Secretary of Health and Human Services issued a letter to Congressman Jim McDermott on October 30, 2013 stating that “qualified health plans” are not considered Federal health care programs.  A copy of this letter is available here.  This eliminates the concern about potential liability under the Anti-Kickback statute.

While qualified health plans may not be Federal health care programs, at least in name, HHS contends that federal regulatory authority and False Claims Act liability apply to state Exchanges and payments associated with them.  In the same letter to Congressman McDermott, Secretary Sebelius, while assuaging concerns regarding Exchanges and the Anti-Kickback statute, left open the door for enforcement of the False Claims Act.  In the letter to Representative Jim McDermott, Sebelius specifically notes that “[t]he Department is taking strong measures to protect consumers and to ensure robust oversight of these critical Affordable Care Act programs.”  These strong measures specifically include a provision that the False Claims Act applies to “payments made by, through, or in connection with an Exchange.” Another strong measure is presumably the power given to HHS and OIG to investigate the “affairs of the Exchange” under the ACA.

Due to these developments and the changing landscape, there are still many open questions with respect to implementation of the Affordable Care Act and Exchanges, such as cost-sharing rights and obligations of providers and the insured during the federal grace period for non-payment of premiums.  Until more of these questions are answered, plans and providers participating in state Exchanges must be wary in light of HHS’s position that they are subject to federal regulation and the False Claims Act.

This post was contributed by Danielle Holley and Kurt Bratten.