A. Xavier BakerTroy A. Barsky

On August 18, 2016, CMS issued a request for information on “inappropriate steering of people eligible for Medicare or Medicaid into Marketplace plans” by third parties. CMS voiced concern over “anecdotal reports” that Medicaid or Medicare eligibles received premium and cost-sharing assistance from third parties so they could enroll in Marketplace plans, enabling providers to receive higher reimbursement rates. In November 2013, CMS had issued guidance discouraging third-party payment of premiums because it has the propensity to “skew the insurance risk pool and create an unlevel field in the Marketplaces.” Almost three years later, it appears that CMS has determined that more decisive action may be necessary.

In July, UnitedHealthcare filed suit against American Renal Associates LLC in the United States District Court for the Southern District of Florida (complaint), alleging ARA violated Florida’s deceptive and unfair trade practices act, fraud, unjust enrichment, conspiracy, and other causes of action. The suit alleges that ARA coordinated with the American Kidney Foundation to pay premiums of low-income enrollees to switch from government health care programs to private insurance coverage. The suit alleges that by steering enrollees from Medicaid and Medicare to private insurance, ARA was able to increase billing from about $300 to $4,000 for the same services. The complaint also alleges that ARA did not collect copayments or deductibles from the enrollees after covering their premiums for private insurance and so committed negligent misrepresentation and tortious interference with a contract by misrepresenting the charges of claims submitted to UnitedHealthcare.

Also in July, Blue Shield of California (“BSC”) filed suit in California state court against Santa Barbara San Luis Obispo Regional Health Authority (complaint) (known as “CenCal”), a public-entity Medicaid managed care organization, alleging that CenCal violated a statutory obligation to perform a mandatory duty as a public entity by identifying 40 of its sickest members and paying their premiums in order to shift the costs and burdens of their coverage to BSC. BSC also alleged that CenCal violated California’s unfair and unlawful business practices laws and was unjustly enriched by actively marketing this arrangement to providers, brokers, and prospective members, highlighting that shifting members to BSC’s Marketplace coverage would result in higher reimbursement rates for providers.

The press release and the RFI explain that CMS is concerned about the impact of third-party premium payments on both beneficiaries and insurers. CMS notes that beneficiaries may experience disruption in continuity and coordination of care because of changes to their provider network and that they may incur higher costs, such as repayment of advance premium tax credits or loss of dental care. Likewise, CMS notes that shifting sicker patients to private coverage distorts the risk pool for insurers and ultimately increases the costs of Marketplace coverage for all enrollees.

CMS also reiterated that, “[i]t is improper to influence people away from Medicare or Medicaid coverage for the purpose of financial gain.” In a letter to Medicare-enrolled dialysis providers, CMS reminded providers that when someone already is receiving Medicare and/or Medicaid benefits, it is illegal to sell them coverage knowing it duplicates Medicare and/or Medicaid coverage and doing so is punishable by up to 5 years in prison and/or civil monetary penalties, citing 42 U.S.C. 1395ss(d)(3).

CMS is considering several regulatory changes to address its concerns about problematic third-party payment of premiums, including:

  • Revisions to Medicare and Medicaid provider enrollment rules;
  • Civil monetary penalties for individuals that fail to provide correct information when enrolling consumers in individual market plans;
  • Allowing individual-market plans to limit their reimbursements to providers to Medicare-based amounts for certain services or items of care; and
  • Using existing civil monetary penalty authority to sanction providers who induce Medicare-eligible individuals to delay Medicare enrollment if the Medicare-eligible individual is penalized for delayed enrollment.
  • Comments in response to the RFI are due by September 22.