As we reported earlier this week, Rep. Jim McDermott, the ranking Democrat on the Ways and Means Health Subcommittee in the House of Representatives, received a response to his August 6 letter to Secretary of Health and Human Services, Kathleen Sebelius, on whether Qualified Health Plans (QHPs) sold on the new health care exchanges were considered “federal health care program[s]” under Section 1128B(f) of the Social Security Act. Sebelius responded that the QHPs were not considered federal health care programs and, as such, not subject to the provisions of the
This is relevant because “federal health care programs,” as defined in the Social Security Act, are subject to the
As a result, hospitals, branded pharmaceutical manufacturers, and some consumer groups hailed the decision. Exclusion from the
On the other hand, a host of industry stakeholders, such as pharmacy benefit managers, generic drug manufacturers, and commercial health plans expressed concern at the new policy. These stakeholders fear that exempting subsidized health insurance from laws that ban rebates or kickbacks would shift utilization away from generic drugs to branded drugs. For example, though drug coupons would drive down copayments for brand-name drugs, often insurers will still pay much more for brand-name drugs than for their generic counterparts – a situation feeding fears that this change will cause health care spending to rise and shift utilization away from generic to branded drugs.
Then, on November 4, 2013, the Center for Consumer Information & Insurance Oversight (CCIIO), which is the component of CMS that regulates QHPs, issued a Q&A document, entitled “Third Party Payments of Premiums for Qualified Health Plans in the Marketplaces,” which “discourage[d]” cost-sharing and premium payment support, but did not reverse the assertion that QHPs were not federal health care plans as defined under 1128B of the Social Security Act.
What is most perplexing for lawmakers and industry stakeholders alike, is that even as recently as a Senate Hearing on Wednesday morning (November 6), Secretary Sebelius again stated in response to questioning from Senator Charles Grassley (R-IA) that QHPs were not “federal health care programs” but that HHS would continue to monitor the plans for potential fraud and abuse. She did not directly address the CCIIO memo. Adding to the confusion is that the vast majority of stakeholders did not consider this a contentious issue and thus the impetus for the McDermott letter and ensuing response from HHS is yet unclear.
As a result of the HHS response, stakeholders may need to change their strategies going into 2014. However, the CCIIO memo and lack of concurring opinion from the Department of Justice (DOJ) has given most companies and organizations reasons to move with caution as HHS and the Obama Administration work to coordinate both their interpretation of the statute and ensuing enforcement.
Congressional staff seem similarly perplexed as to why and how HHS came up with this determination and the nature of coordination between HHS and CMS in crafting the response to McDermott, much less other federal government entities such as the Department of Justice or the White House. Clearly, there is a public perception benefit in distinguishing plans on the exchange from traditional federal health programs like Medicare. However, the resulting pushback from commercial health plans, generic drug manufacturers, pharmacy benefit managers and others that claim health care costs will rise if
Further, Senator Grassley continued his investigation into the matter via a formal letter to HHS and DOJ on November 7, requesting more information about how and when the decision was made, whether DOJ will decline to intervene in qui tam suits, and other information surrounding the issue. Grassley’s letter requested a response to his questions by November 13.
The only thing for certain in the past several days is that stakeholders, lawmakers, and industry analysts alike are still unclear as to whether QHPs are, indeed, not “federal health care programs,” and what activities will be permissible that would otherwise have been illegal under the
Although the Obama Administration clearly has its hands full with website troubles and other ACA implementation issues, the implications of this interpretation of the law cannot be overstated and industry stakeholders will have to weigh the risks in making significant business decisions before the Administration clarifies the law going forward.