DHHS Takes Position that Exchange Plans are not Federal Health Care Programs

According to a letter sent by Secretary of the Department Health and Human Services (DHHS) Kathleen Sebelius to Jim McDermott (D-WA) in the US House of Representatives on October 30, 2013, Qualified Health Plans (QHPs) available to consumers via federally facilitated and state-run health insurance exchanges (Exchanges) are not “federal health care programs” as defined under the federal Anti-Kickback Statute (AKS). In the letter, Secretary Sebelius stated that DHHS “does not consider QHPs, other programs related to the [f]ederally facilitated [m]arketplace, and other programs under Title I of the Affordable Care Act” to qualify under the definition of “federal health care program” in the Social Security Act (section 1128B(f), codified at 42 U.S.C. § 1320a-7b(f)).
 
While it is significant that the relationships between providers, pharmaceutical manufacturers and other third parties, and QHP sponsors will not be subject to the intense scrutiny that currently applies to relationships between providers who participate in federal health care programs under the AKS, Congress has expressly provided for the federal False Claims Act to apply to “any payments made by, through or in connection with an Exchange if the payments include Federal funds.” As such, QHP sponsors, navigators, and even consumers potentially face federal False Claims Act exposure related to their receipt and use of federal funds associated with an Exchange or QHP participation, including premium tax credits and cost-sharing subsidies.  
 
Had the QHPs offered on the Exchanges been considered “federal health care programs,” programs such as preferred provider arrangements between QHP sponsors and providers; purchasing arrangements between QHPs and pharmaceutical companies or between QHPs and durable medical equipment suppliers that involve discounts; and other standard business arrangements could have been scrutinized under the AKS. As such, many would have elected to structure such arrangements to meet various AKS safe harbors, placing extensive burdens on QHP sponsors, providers, and other third parties entering into such arrangements. Without this prohibition, QHP sponsors, providers, and suppliers have more latitude to enter into arrangements aimed at containing or reducing QHP costs.