- Industry stakeholders were generally surprised to recently learn that health plans offered on the health care exchanges may not be considered "federal health care programs" and therefore may not be subject to certain fraud and abuse laws.
- Despite a letter from HHS Secretary Kathleen Sebelius stating that the exchange plans were not federal health care programs, a subsequent letter from CMS and the absence of additional guidance from DOJ has created confusion amongst lawmakers and the health care sector.
- While the Sebelius letter could mean higher enrollment and greater access to premium assistance and brand name drug coupons that lower the cost for individual consumers, some stakeholders such as pharmacy benefit managers and health plans believe there will be a rise in health care costs and a shift in utilization away from generic drugs.
Background
As
we reported earlier this week, Rep. Jim McDermott, the ranking
Democrat on the Ways and Means Health Subcommittee in the House of
Representatives, received a response to his August 6 letter to
Secretary of Health and Human Services, Kathleen Sebelius, on
whether Qualified Health Plans (QHPs) sold on the new health care
exchanges were considered "federal health care
program[s]" under Section 1128B(f) of the Social Security Act.
Sebelius responded that the QHPs were not considered federal health
care programs and, as such, not subject to the provisions of the
This is relevant because "federal health care
programs," as defined in the Social Security Act, are subject
to the
As a result, hospitals, branded pharmaceutical
manufacturers, and some consumer groups hailed the decision.
Exclusion from the
On the other hand, a host of industry stakeholders, such as pharmacy benefit managers, generic drug manufacturers, and commercial health plans expressed concern at the new policy. These stakeholders fear that exempting subsidized health insurance from laws that ban rebates or kickbacks would shift utilization away from generic drugs to branded drugs. For example, though drug coupons would drive down copayments for brand-name drugs, often insurers will still pay much more for brand-name drugs than for their generic counterparts – a situation feeding fears that this change will cause health care spending to rise and shift utilization away from generic to branded drugs.
Then, on November 4, 2013, the Center for Consumer
Information & Insurance Oversight (CCIIO), which is the
component of CMS that regulates QHPs, issued a Q&A document,
entitled "Third Party Payments of Premiums for Qualified
Health Plans in the Marketplaces," which
"discourage[d]" cost-sharing and premium payment support,
but did not reverse the assertion that QHPs were not federal health
care plans as defined under 1128B of the Social Security Act.
Confusion Persists
What is most perplexing for lawmakers and industry stakeholders alike, is that even as recently as a Senate Hearing on Wednesday morning (November 6), Secretary Sebelius again stated in response to questioning from Senator Charles Grassley (R-IA) that QHPs were not "federal health care programs" but that HHS would continue to monitor the plans for potential fraud and abuse. She did not directly address the CCIIO memo. Adding to the confusion is that the vast majority of stakeholders did not consider this a contentious issue and thus the impetus for the McDermott letter and ensuing response from HHS is yet unclear.
As a result of the HHS response, stakeholders may need to change their strategies going into 2014. However, the CCIIO memo and lack of concurring opinion from the Department of Justice (DOJ) has given most companies and organizations reasons to move with caution as HHS and the Obama Administration work to coordinate both their interpretation of the statute and ensuing enforcement.
Congressional staff seem similarly perplexed as to
why and how HHS came up with this determination and the nature of
coordination between HHS and CMS in crafting the response to
McDermott, much less other federal government entities such as the
Department of Justice or the White House. Clearly, there is a
public perception benefit in distinguishing plans on the exchange
from traditional federal health programs like Medicare. However,
the resulting pushback from commercial health plans, generic drug
manufacturers, pharmacy benefit managers and others that claim
health care costs will rise if
Further, Senator Grassley continued his investigation into the matter via a formal letter to HHS and DOJ on November 7, requesting more information about how and when the decision was made, whether DOJ will decline to intervene in qui tam suits, and other information surrounding the issue. Grassley's letter requested a response to his questions by November 13.
Conclusion
The only thing for certain in the past several days
is that stakeholders, lawmakers, and industry analysts alike are
still unclear as to whether QHPs are, indeed, not "federal
health care programs," and what activities will be permissible
that would otherwise have been illegal under the
Although the Obama Administration clearly has its hands full with website troubles and other ACA implementation issues, the implications of this interpretation of the law cannot be overstated and industry stakeholders will have to weigh the risks in making significant business decisions before the Administration clarifies the law going forward.
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