OIG Allows Medigap Policy to Provide Premium Credits for Patients Using Network Hospitals

In Advisory Opinion 14-02, released on February 20, 2014, the Office of Inspector General (OIG) advised that it would not impose sanctions pursuant to the anti-kickback statute and civil monetary penalty law for the arrangement between a licensed offeror of Medigap policies and preferred provider organizations (PPOs) that contract with network hospitals.  As part of the arrangement, the network hospitals would provide up to a 100 percent discount on Medicare Part A inpatient deductibles that would otherwise be paid by the Medigap policy.  Each time this discount was received, the Medigap Policy would pay the corresponding PPO an administrative fee and provide the patient a $100 discount on the patient’s next premium due to the Medigap policy.  If a patient did not choose a network hospital, the patient would not incur any additional liability for the services, he would simply not receive the premium credit.

Importantly, each PPOs hospital network would be open to any accredited, Medicare certified hospital that meets state laws and agrees via contract to provide the inpatient Part A deductible discount for the Medigap Policy holders. Also, the premium credit would be advertised to potential policyholders and network hospitals would be identified.

In its analysis, the OIG determined that there is not a safe harbor applicable to the proposed arrangement but that there is no more than a minimal risk of fraud or abuse under the anti- kickback statute and therefore penalties under the anti-kickback statute would not be imposed on the proposed arrangement. The OIG relied on the following in coming to this conclusion: neither the discounts from the hospitals or premium credits to the patients would increase or affect per-service Medicare payments; the arrangement would not likely increase utilization; it would not unfairly affect competition between hospitals as any Medicare certified, accredited hospital could choose to participate; it would not affect professional judgment as physicians and surgeons would see no remuneration from the arrangement and policy holders are free to choose any hospital without incurring any additional cost; and the arrangement would be transparent as policyholders would be informed they can choose any hospital at no additional cost.

Regarding the civil monetary penalty law, the OIG noted that the proposed arrangement would implicate the prohibition on inducements to beneficiaries as the 100 dollar premium credit is an inducement to select an in network provider.  However, the OIG found that similar to the exception for differentials in coinsurance and deductible amounts as part of a benefit plan,  located at 1128A(i)(6)(c) of the Social Security Act, this arrangement would pose a low risk of fraud and abuse and would have “substantially” the same purpose and effect as the differentials described in the exception.   The OIG further noted that the arrangement would not increase costs for policy holders choosing out of network hospitals and, because the savings would be reported to state-insurance setting regulators, had the potential to lower costs for all Medigap policy holders.

Speak Your Mind