The Office of General Counsel has issued the following informal opinion on May 30, 2000 representing the position of the New York State Insurance Department.
Family Practice Clinic for Uninsureds.
May a medical doctor establish a program in which he charges a flat monthly fee to uninsured patients for medical care, notwithstanding the number of office visits per month?
No. Such a program would constitute the "doing of an insurance business" without a license in violation of N.Y. Ins. Law § 1102 (McKinney 1985 & Supp. 2000).
A medical doctor attempting to establish a solo family clinic in the New York City area seeks to implement a program in which he would charge a flat monthly fee to uninsured patients for medical care, notwithstanding the number of office visits per month.
The program would be limited to patients in his practice and to patients without health insurance; it would be optional for patients to participate in the program; patients could stop participating at any time; patients would be charged a flat monthly fee of $24 per month; the office would write off all physician charges and in-house lab charges for the patients; and, this would not effect any charges outside of the patients care in the doctors office.
The program described comes within the statutory definition of an insurance business. N.Y. Ins. Law § 1101 (McKinney 1985 & Supp. 2000) states that the making of any insurance contract constitutes the doing of an insurance business in this state. N.Y. Ins. Law § 1101(a) (McKinney 1985 & Supp. 2000) defines the terms "insurance contract" and "fortuitous event" as follows:
"Insurance contract" means any agreements or other transaction whereby one party, the "insurer", is obligated to confer a benefit of pecuniary value upon another party, the "insured" or "beneficiary", dependent upon the happening of a fortuitous event in which the insured or beneficiary has, or is expected to have at the time of such happening, a material interest which will be adversely affected by the happening of such event.
"Fortuitous event" means any occurrence or failure to occur which is, or is assumed by the parties to be, to a substantial extent beyond the control of either party.
The benefits that the clinic would provide would be dependent upon the happening of a fortuitous event, that being the need for medical care, which is beyond the control of either party. In the past, the Department has said that the making of a service plan, such as the proposed program, which for a pre-paid fee provides unlimited services dependent upon the happening of a fortuitous event, constitutes the doing of an insurance business under N.Y. Ins. Law § 1101 (McKinney 1985 & Supp. 2000) and requires a license pursuant to N.Y. Ins. Law § 1102 (McKinney 1985 & Supp. 2000).
However, a service plan where the pre-paid fee is a membership fee, and certain services occasioned by the happening of a fortuitous event are offered for an additional fee per service but is discounted from the usual fee, does not constitute the doing of an insurance business, and does not require an insurance license. The fee per service must cover the cost of rendering the service (including reasonable overhead). Additionally, the Department has opined that the prepaid membership fee may include free or nominally priced services, so long as these benefits are of a non-fortuitous nature.
Two previously rendered opinions dealt with dental and vision service plans. Generally, these plans have two parts. The first is a free routine annual examination, including routine X-rays in the case of dental programs, incorporated in the cost of the prepaid membership. This is allowed because these services are not occasioned by the happening of a fortuitous event. The second part is the additional service (such as filling a cavity) that is occasioned by the happening of a fortuitous event, available at discounted fees. While the fees for these services can be discounted, they must cover the cost of the rendition of the services provided.
For further information you may contact Attorney Meredith S. Katz at the New York City Office.