OIG Approves Medicare Advantage EGWP Gainshare Payments to Employer Groups

Background

An MA organization and its subsidiaries that offer EGWPs proposed a savings-sharing arrangement with the employer groups, trusts, and unions (each a Group) to which it provides coverage. Under the arrangement, the MA organization would give Groups the opportunity to receive a gainshare payment (Gainshare Payment) — a percentage of the organization’s savings — if actual medical expenses came in below a negotiated target. Key structural features included:

• Gainshare Payments are not guaranteed — if the plan performs as actuarially predicted, no payment would be earned;
• Groups are contractually required to use any Gainshare Payment to benefit their enrollees (e.g., funding enhanced benefits, wellness programs, or group health plan administrative expenses); and
• The Gainshare Payment amount could exceed any additional premium paid by the Group, and payments may be made to Groups that do not pay any additional premium.

Why OIG Approved?

1) Federal Anti-Kickback Statute

The OIG concluded that the Gainshare Payment would constitute remuneration that could induce a Group to refer its enrollees to the MA organization for federally reimbursable items and services. No safe harbor applied. However, the OIG determined the risk of fraud and abuse was sufficiently low based on the following factors:

• No Impact on CMS Payments: Gainshare Payments do not affect the capitated amounts CMS pays to the MA organization for its EGWP plans.
• No Guaranteed Incentive: If the plan performs as actuarially predicted, no Gainshare Payment would be earned, mitigating the risk of steering.
• Enrollee Benefit Requirement: Groups must use any Gainshare Payment to benefit enrollees, and Groups subject to ERISA or state fiduciary obligations face additional constraints on use of funds.
• Permissible Negotiation Element: The Gainshare Payment opportunity is part of a broader negotiation between the parties over benefits, premiums, and plan design, flexibilities CMS already permits for EGWPs.

2) CMS Regulatory Context

The OIG noted that CMS has waived the MA bidding and rebate-distribution requirements for EGWPs since 2017. CMS clarified that 42 C.F.R. § 422.266, which governs the use of beneficiary rebates, does not restrict how an EGWP uses the entire payment it receives from CMS, “particularly its own gain/loss margin.” While this statement does not expressly authorize Gainshare Payments as part of the program, it confirms that § 422.266 does not apply to the portion of an EGWP payment not classified as a rebate. The OIG cautioned, however, that if CMS program rules governing EGWPs’ operation or payment were to materially change, the opinion could be subject to modification or termination.

Key Takeaway

OIG Advisory Opinion 26-07 provides a roadmap for MA organizations offering EGWPs that wish to explore shared savings arrangements with employer groups. The opinion signals that gainshare-style payments may be permissible under the Federal Anti-Kickback Statute in the following circumstances:

• Payments are contingent on actual performance against a negotiated target and are not guaranteed;
• Recipients are contractually required to use payments for the benefit of enrollees; and
• The arrangement does not affect CMS capitated payments and operates within existing EGWP flexibilities regarding benefits, premiums, and plan design.

General Disclaimer Regarding OIG AO

The OIG’s opinion is limited to the specific facts and parties at issue. Any material changes or undisclosed facts could render the opinion void, and it is not automatically applicable to different structures or arrangements. The opinion also expressly does not address the physician self-referral law, the False Claims Act, or any state or local laws.

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