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HHS Announces That ACA Exchange Plans Are Not “Federal Health Care Programs”

Written by:  Theresa C. Carnegie

In a surprising move late last week, HHS Secretary Kathleen Sebelius announced that qualified health plans (QHPs) purchased through the Affordable Care Act’s (ACA) insurance exchanges are not “federal health care programs” for purposes of the federal anti-kickback statute.

In a letter to Rep. Jim McDermott (D-Wash), Sebelius states that this conclusion was based upon a careful review of the definition “federal health care program” in consultation with the Department of Justice and applies to:

  • State-based and federally-facilitated Marketplaces;
  • The cost-sharing reductions and advance payments of the premium tax credit;
  • Navigators for the federally-facilitated Marketplaces and other federally funded consumer assistance programs;
  • Consumer-oriented and operated health insurance plans; and
  • The risk adjustment, reinsurance, and risk corridors programs.

Sebelius notes that HHS “is taking strong measures to protect consumers and to ensure robust oversight of these critical Affordable Care Act programs” and refers to the (i) Program Integrity: Exchange, SHOP, Premium Stabilization programs and Market Standards proposed rule, and (ii) finalized first set of compliance standards from that proposed rule in the Program Integrity: Exchange, SHOP, and Eligibility Appeals rule, which include requirements for decertification of QHPs and the imposition of civil monetary penalties against non-compliant issuers.  In addition, ACA expressly provides that the False Claims Act applies to “any payments made through, or in connection with an Exchange if the payments include federal funds.”  Finally, the OIG has jurisdiction to audit and investigate HHS-administered programs and the “affairs of an Exchange.”

Prior to HHS’s announcement, there was considerable debate as to whether QHPs would fall within the definition of “federal health care program” and whether the financial relationships between plans and providers within the Exchanges would be subject to the restrictions of the federal anti-kickback statute.  Sebelius’ letter opens the door for providers, such as hospitals, that are considering paying patient premiums or offering other patient assistance programs, and for the offer of drug copay coupons by pharmaceutical manufacturers within the Exchanges.

Drug copay coupons have been a hot button issue for many years.  Manufacturers and certain patient support groups contend that copay coupons provide valuable assistant to individuals who need help affording their medications, while plans and pharmacy benefit managers counter that the coupons undermine the use of copayments to steer patients to lower cost generic drugs.  The Pharmaceutical Care Management Association (PCMA) is concerned that Sebelius’ announcement may undermine cost controls within the Exchanges and has indicated that it plans to challenge the HHS determination.  Therefore, it seems that despite the apparently clear guidance from HHS, the debate over copay coupons may rage on.

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Theresa advises clients on all aspects of the pharmaceutical supply chain, including counseling industry stakeholders on a range of business, legal, transactional, and compliance matters. She provides clients with strategic counseling and creative business modeling that considers legal restrictions and regulatory risk in light of innovation and business goals.