Do Subsidized Health Care Plans Purchased Under the Affordable Care Act Trigger the Anti-Kickback Statute?

By Scott F. Roberts

The advent of federally subsidized private pay health insurance under the Affordable Care Act has the potential to expand the application of the federal anti-kickback statute beyond just Medicare, Medicaid, and Tricare. The Affordable Care Act (sometimes referred to as “Obamacare”) currently allows individuals to purchase and receive private health insurance coverage from state or federal health insurance exchanges. While not all individuals are eligible for subsidies, a substantial number of people will receive income-based federal subsidies that have the potential to trigger the federal anti-kickback statute, and by extension, the False Claims Act.

The federal anti-kickback statute applies to referrals involving a “Federal health care program,” which 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.” On October 30, the Secretary of Health and Human Services announced in a letter to a member of Congress that under HHS’s interpretation of the anti-kickback statute, Qualified Health Plans subsidized under the Affordable Care Act would not be considered to be a part of a “federal health program”. The letter states that HHS’s position was based on “careful review” of the definition of a “Federal health program” and was made “in consultation with the Department of Justice.” It would therefore appear that HHS is taking the position that the federal government is not directly funding health insurance benefits but is instead providing indirect financial support to purchasers in the form of tax subsidies and premium assistance.[1]However, this rationale would likely not apply to “reduced cost sharing subsidies” that provide lower premiums and co-pays to low income individuals because such subsidies are paid directly to the insurance plans.

There are many reasons to take HHS’s October 30thletter with a grain of salt. First, this was not formal guidance issued by the HHS, but instead came in the form of a non-binding letter, meaning HHS could very well change its interpretation with little to no warning. Courts would not be bound by this type of informal guidance, meaning a federally subsidized Qualified Health Plan could still be the basis for a whistleblower’s Qui Tam lawsuit based on an anti-kickback claim. Moreover, HHS’s interpretation does not appear to be on particularly strong legal footing with respect to “reduced cost sharing subsidies,” and the precise legal analysis was never explained in the letter.

Nonetheless, there is likely not an immediate need to ensure that practitioners who accept Qualified Health Plans, but do not accept Medicare, Medicaid, and Tricare comply with the federal anti-kickback statute. However, given the lack of legal analysis contained in the October 30, 2013 letter, it is likely that HHS’s position will be readdressed, and possibly even reversed, in future guidance documents.

[1]HHS has yet to publically explain its legal reasoning for not applying the anti-kickback statute to the ACA. However, many commenters believe the actual rationale is based on policy, as opposed to legal, reasons. Some commenters have speculated that the decision was made in order to allow pharmaceutical companies to provide co-payment assistance to those who could not afford to purchase pricey prescription drugs. Such payments would be considered illegal “kickbacks” under the anti-kickback statute. Still others have speculated that the rationale behind the October 30, 2013 letter is that HHS feared that application of the act to Qualified Health Plans would confuse certain providers, which could in turn interfere with, or at the very least distract from, the 2014 ACA rollout. This confusion could result from the fact that providers may not be able to readily distinguish between subsidized and non-subsidized health insurance policies.