By Rebecca Mayo, J.D.
A Medicare Supplemental Health Insurance policy (Medigap) provider’s proposed arrangement to reduce costs on hospital inpatient deductibles, the savings from which would then be shared with policyholders in the form of a credit on premiums, would not lead to the imposition of sanctions or penalties. The OIG concluded, in an Advisory Opinion, that although the proposed arrangement could potentially generate prohibited remuneration under the anti-kickback statute (AKS), there was a sufficiently low risk of fraud or abuse (OIG Advisory Opinion, No. 18-09, August 21, 2018).
Proposed plan. A licensed offeror of Medigap policies proposed to enter into an agreement with a preferred hospital organization (PHO) which has contracts with hospitals throughout the country (network hospitals). Under the agreement, the network hospitals would provide discounts of up to 100 percent on Medicare Part A inpatient hospital deductibles incurred by the insurer’s plan policyholders that otherwise would be covered by the insurer. The insurer would then pay the PHO a fee for administrative services and the savings would be shared with the policyholder in the form of a $100 credit towards the policyholder’s next renewal premium owed to the insurer. Policyholders admitted to a hospital other than a network hospital would not be affected and the insurer would still pay the full Part A hospital deductible.
Anti-kickback statute. The OIG concluded that the proposed plan would not qualify for any protection under either the safe harbor for waivers of beneficiary coinsurance and deductible amounts or the safe harbor for reduced premium amounts offered by health plans. However, The OIG did not believe that the proposed plan would present more than a minimal risk of fraud and abuse under the AKS. It found that neither the discounts nor the premium credits would increase or affect per-service Medicare payments. It should not unfairly affect competition among hospitals because membership in the PHO’s hospital network would be open to any accredited Medicare-certified hospital. It would also be unlikely to affect professional medical judgment because policyholder’s physicians and surgeons would receive no remuneration and policyholders would be free to go to any hospital without incurring any additional out-of-pocket expense.
The proposed plan would be unlikely to increase utilization since the discounts effectively would be invisible to policyholders because they only apply to the portion of the individual’s cost-sharing obligations that his or her supplemental insurance would otherwise cover. And finally, the arrangement would operate transparently by informing policyholders of their freedom to choose any hospital without incurring additional liability or penalty.
Civil monetary penalties. While the premium credits would implicate the prohibition on inducements to beneficiaries, the OIG noted the exception for differentials in coinsurance and deductible amounts as part of a benefit plan design. The premium credit would not technically be a differential in a coinsurance or deductible amount but the OIG found that it would have substantially the same purpose. Therefore, the OIG concluded that the premium credit would present a sufficiently low risk of fraud or abuse under the prohibition on inducements to beneficiaries. Additionally, because savings realized from the proposed plan would be reported to the state insurance rate-setting regulator, the proposed plan has the potential to lower costs for all policyholders.
Decision. Based on all of these facts and circumstances, and given the sufficiently low risk of fraud or abuse and the potential savings for beneficiaries, the OIG decided that it would not impose administrative sanctions on the insurer under the AKS or the prohibition on inducements to beneficiaries.
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