HHS Announces Its Interpretation that Exchange Plans Are Not “Federal Health Care Programs” For Purposes of Fraud and Abuse Statute

By Delia A. Stubbs & Alan M. Kirschenbaum –

Yesterday, in a letter to Representative Jim McDermott, Secretary of Health and Human Services (“HHS”) Kathleen Sebelius stated that qualified health plans (“QHPs”) and other programs related to health insurance exchanges under Title I of the Affordable Care Act (“ACA”) are not “Federal health care programs” for purposes of the Federal health care program antikickback law and criminal false claims prohibitions at 42 U.S.C. section 1320a-7b.  That section defines a Federal health care program as (1) “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 …” or (2) Medicaid, the State Children Health Insurance Program (SCHIP), or certain other federally subsidized state health care programs.  The letter explained that “Federal health care programs” do not include QHPs themselves, nor state or federal exchanges, cost-sharing reductions or premium tax credits to enrollees, consumer oriented and operated plans (“CO-OPs”), or federal risk adjustment, reinsurance, or risk corridor programs. 

According to Secretary Sebelius, HHS’ decision was based on a careful review of the statutory definition and consultation with the Department of Justice (“DOJ”).  The letter did not explain how HHS or DOJ had arrived at their conclusions, but presumably they did not believe that federal expenditures for operating the exchanges, subsidies to QHP enrollees, or other federal expenditures related to exchanges amount to “direct funding” of a plan. 

Although the Federal health care program antikickback law and criminal false claims penalties will not apply to QHPs and exchanges, Secretary Sebelius sought to reassure Rep. McDermott that HHS has other vehicles to ensure oversight over the ACA insurance programs – most notably the Federal False Claims Act, which, under a provision added by the ACA, applies to “payments made by, through, or in connection with an Exchange” if the payments include any Federal funds.  ACA § 1313(a)(6)(A).