In its second advisory opinion of the year, issued February 12, 2014, the U.S. Department of Health & Human Services, Office of Inspector General (OIG) determined that it would not impose sanctions pursuant to the anti-kickback statute or civil monetary penalty law on a proposed arrangement involving a licensed offeror of Medicare supplemental health insurance (Medigap) policies, preferred provider organizations (PPOs), and hospitals participating in the PPO networks. Under the proposed arrangement, network hospitals would waive the Medigap policyholders’ inpatient deductibles, which would otherwise have been paid by the Medicap insurer. Each time this discount was received, the Medigap insurer would pay the corresponding PPO an administrative fee and would provide the patient a $100 premium credit. The insurer would market the credit to its existing and potential policyholders and would identify the participating network hospitals.
The OIG began its analysis of the proposed arrangement under the anti-kickback statute. Although the arrangement failed to qualify for either the waivers of beneficiary coinsurance and deductible amounts safe harbor or the reduced health plan premium amounts safe harbor, the OIG found that the proposed arrangement presented no more than a minimal risk of fraud and abuse under the anti-kickback statute due to the following factors:
(a) The hospital waivers would not increase or affect the Medicare Part A payments for inpatient services, which are fixed and are unaffected by beneficiary cost-sharing;
(b) The arrangement was unlikely to increase utilization because the amount waived by the hospitals was owed by the insurer, not the patient;
(c) The arrangement would not adversely affect hospital competition because participating in the PPO networks would be open to any Medicare certified, accredited hospital that meets state law requirements;
(d) The arrangement would not affect medical judgment because policyholders would not incur any additional cost based on their hospital selection and physicians and surgeons would not receive any remuneration; and
(e) The policyholders would be informed that they can choose any hospital without incurring any penalty or increased cost.
Because the $100 premium credits served as an incentive for policyholders to select an in networkhospital, the OIG also analyzed the arrangement under the civil monetary penalty provision prohibiting beneficiary inducements. Finding that the premium credits were substantially similar in purpose and effect to differentials in coinsurance and deductible amounts, which are excepted from the definition of remuneration, the OIG concluded that the arrangement would pose a low risk of fraud and abuse. Additionally, the OIG noted that the arrangement had the potential to lower costs for all Medigap policyholders because it did not increase costs for policyholders choosing out of network hospitals and the savings would be reported to state-insurance setting regulators.