OIG: No Sanctions for Medigap Insurer's Preferred Hospital Arrangement

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By Nathaniel Weixel

Oct. 21 — A preferred arrangement between an insurer and a hospital organization for discounted Medigap plans wouldn't lead to the imposition of administrative sanctions for violations of the anti-kickback statute, according to an advisory opinion (14-10) the Department of Health and Human Services Office of Inspector General released Oct. 21.

Under the proposed arrangement, the insurer would indirectly contract with hospitals for discounts on otherwise-applicable Medicare inpatient deductibles for its policyholders and, in turn, would provide a premium credit of $100 off the next renewal premium to policyholders who use a network hospital for an inpatient stay.

The insurer had asked the OIG if the proposed arrangement would constitute grounds for the imposition of sanctions for providing inducements to Medicare program beneficiaries.

Under the proposed network contracts, hospitals would also provide discounts of up to 100 percent on Medicare Part A deductibles incurred by the insurer's Medigap plan policyholders. Each time the insurer receives the discount from a network hospital, the insurer would pay the network a fee for administrative services, the OIG said.

OIG Analysis

According to the OIG, the discounts offered on inpatient deductibles by the network hospitals, and the premium credits offered to policyholders who have inpatient stays at network hospitals, “would present a sufficiently low risk of fraud or abuse under the anti-kickback statute.”

The agency said the proposed arrangement would be unlikely to increase utilization and wouldn't impact Part A fee-for-service payments, which are fixed.

The OIG also said the proposed arrangement has a low risk of fraud or abuse under the civil monetary penalties law because the premium credits would have the same effect and purpose as a differential in coinsurance and deductible amounts. The proposal may have been classified as inducing policyholders to select a particular provider in a violation of the prohibition on inducements.

The OIG said the proposal has the potential to lower Medigap costs for policyholders who select network hospitals, without increasing costs to those who don't. Additionally, “because savings realized from the proposed arrangement would be reported to state insurance rate-setting regulators, the proposed arrangement has the potential to lower costs for all policyholders,” the OIG said.

To contact the reporter on this story: Nathaniel Weixel in Washington at nweixel@bna.com

To contact the editor responsible for this story: Ward Pimley at wpimley@bna.com