In a June 24, 2014, article authored for Law360, partners Susan Feigin Harris and Christopher J. Swift discuss questions surrounding whether healthcare entities may subsidize premium payments for individuals enrolling in insurance through the health insurance exchange marketplaces established under the Affordable Care Act (ACA).
In the article (“Risks and Rewards from Hospital Premium Subsidies”), the authors discuss contrasting guidance from U.S. Department of Health and Human Services (HHS) Secretary Kathleen Sebelius and the Centers for Medicare and Medicaid Services (CMS), as well as the response from the American Hospital Association and the Catholic Health Association. The authors then discuss a May 21, 2014, response from Secretary Sebelius that, as the authors note, “confirmed HHS’ position that private, not-for-profit foundations may, within certain parameters, pay for premiums and cost-sharing expenses for enrollees in QHPs sold through the health insurance exchanges.” Harris and Swift then report, “With this guidance, hospital-affiliated and charitable foundations are considering the legal implications of providing subsidies to enrollees.”
The remainder of the article discusses other legal concerns not addressed by HHS, “such as the tax implications for tax-exempt foundations and hospital systems” and the fact that “from a tax perspective, the guidance provided by CMS is not sufficient to alleviate concerns that a hospital-affiliated foundation would be jeopardizing its tax exemption by providing the subsidies.”
In conclusion, the authors state:
While HHS clearly is seeking to balance the issue of promoting the public policy of access to care, consistent with the ACA, with other fraud considerations present in the health care industry, other federal agencies, such as the IRS, and the legal issues associated with tax regulation are a cause for caution and should be fully evaluated before moving forward with a plan to provide premium subsidies to enrollees.