American Renal Associates (ARA): CMS Lowers The Axe On 3rd Party Premium Assistance - Leerink

August 19, 2016 7:42 AM EDT
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Leerink Partners analyst Ana Gupte, noted that CMS issued an RFI to the public and warning letter to dialysis providers regarding the practice of third party premium assistance on Exchanges. Specifically, the practice is aimed at shifting patients eligible for Medicaid or Medicare to Public Exchanges to arbitrage the 2-3x price differential for healthcare services.

The RFI was issued to the public asking for reports of such practice. The warning to dialysis providers potentially engaging in such practice is a response to the lawsuit brought forth by UNH (OP) against American Renal Associates (ARA [OP]), and subsequent commentary from other health plans such as ANTM (OP) and AET (OP) on similar concerns.

The health plans suggest these practices as being a significant component of the mounting adverse selection and losses they are experiencing in 2016 on Exchanges which have precipitated the HIX exits by UNH and AET, and diminishing profitability by ANTM.

CMS states that this practice (with the exception of Ryan White and Indian tribes) is already prevented. If the practice involves patients already receiving services paid by Medicaid and Medicare, it is punishable by civil monetary penalties or potentially even imprisonment. CMS says it is also considering further regulatory and operational policy to prohibit these practices.

The analyst notes that companies that could be affected include (negatively) American Renal Associates (NYSE: ARA) negatively and (positively) Aetna (NYSE: AET), Anthem (NYSE: ANTM), and United Healthcare (NYSE: UNH).

For an analyst ratings summary and ratings history on UnitedHealth Group click here. For more ratings news on UnitedHealth Group click here.

Shares of UnitedHealth Group closed at $142.17 yesterday.

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