With Advisory Opinion 18-06, issued July 11, 2018, the OIG added to the ever-growing number of favorable advisory opinions addressing an agreement between a Medicare Supplemental Health Insurance (Medigap) insurer and a preferred hospital organization (PHO). Consistent with prior favorable opinions on this topic, the OIG concluded that the proposed arrangement does not constitute grounds for the imposition of civil monetary penalties, and that it would not impose administrative sanctions in connection with the Anti-Kickback Statute with respect to the proposed arrangement.
Under the proposed arrangement, the Medigap insurer requesting the advisory opinion would contract with a PHO to receive discounts of up to 100 percent on Medicare Part A inpatient hospital deductibles incurred by Medigap policyholders. No other cost-sharing amounts are eligible. Hospitals that are under contract with the PHO (Network Hospitals) would provide the discount on the Medicare Part A inpatient deductible to the Medigap insurer when Medigap policyholders have an inpatient stay at a Network Hospital. Additionally, the Medigap insurer would provide policyholders with a $100 premium credit when they use a Network Hospital for their inpatient stay. The Medigap insurer would pay the PHO a fee for administrative services for every discount received from the Network Hospital under this arrangement. The OIG determined that the proposed arrangement could potentially implicate both the Anti-Kickback Statute and the civil monetary penalty against inducements to beneficiaries (CMP); however, the OIG concluded it would not impose administrative sanctions.
Similar to several previous advisory opinions addressing such arrangements, the OIG found that the proposed arrangement did not qualify for safe harbor protection for waiver of beneficiary coinsurance and deductibles (42 C.F.R. 1001.952(k)) or for reduced premium amounts by health plans (42 C.F.R. 1001.952(l)). Nonetheless, the OIG determined that the proposed arrangement presents a minimal risk of fraud and abuse for the following reasons: Per-service Medicare payments remain the same.
- Utilization is unlikely to increase because the cost-sharing would be covered by insurance, which makes the benefit effectively invisible to beneficiaries.
- The PHO is open to any accredited, Medicare-certified hospitals that meet applicable state law requirements.
- Medical judgment is unaffected because no remuneration is provided to physicians.
- Medigap policyholders retain the freedom to choose any hospital and do not incur a penalty for choosing a non-Network Hospital.
With regard to the CMP for beneficiary inducement, the OIG concluded that an exception allowing differentials in deductibles and cost-sharing as part of a benefit plan design, while not directly applicable to the arrangement, would apply sufficiently by analogy to reduce the risk that beneficiaries would be unduly influenced by the described benefit. Further, the OIG determined that the arrangement, which would be reported to state insurance rate-setting agencies, could lead to savings that would reduce costs for all plan members, regardless of whether they had qualifying hospital stays.