New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

The Office of General Counsel issued the following informal opinion on December 14, 2000, representing the position of the New York State Insurance Department.

RE: Chiropractic Group Office

Questions Presented:

1) May a chiropractic group waive an insured patient’s co-payment amount based on the patient’s financial hardship?

2) May a chiropractic group charge its uninsured patients a lower rate than it charges its insured patients for the same services?

3) May a chiropractic group charge its patients who pay by cash lower rates than it charges patients who pay by credit card for the same services?

4) May a chiropractic group charge a flat fee as payment for unlimited services over a set period of time?

Conclusions:

1) A chiropractic group that, as a general practice, waives insured patients’ co-payment amounts, even if based on the patients’ financial hardship, may be in violation of N.Y. Penal Law § 176.05 (McKinney 1999).

2) A chiropractic group that charges its uninsured patients lower rates than it charges its insured patients for the same services may be in violation of N.Y. Penal Law § 176.05 (McKinney 1999).

3) A chiropractic group that charges patients who pay by cash lower rates than it charges patients who pay by credit card for the same services may be in violation of N.Y. Penal Law § 176.05 (McKinney 1999).

4) A chiropractic group that is not licensed as an insurer, and which charges a flat fee as payment for unlimited services over a set period of time, is in violation of N.Y. Ins. Law § 1102 (McKinney 2000).

Facts:

A chiropractic group office in New York State, which has contracted with most of the major health insurers, questioned whether it may engage in any of the activities described above in "Questions Presented".

Analysis:

A chiropractic group that waives insured patients’ co-payment amounts on a regular basis (regardless of the patients’ financial hardship), charges its uninsured patients lower rates than it charges its insured patients for the same services, or charges its patients who pay by cash lower rates than it charges patients who pay by credit card, for the same services may be in violation of N.Y. Penal Law § 176.05(2) (McKinney 1999), which states, in relevant part:

(2) A fraudulent health care insurance act is committed by any person who, knowingly and with intent to defraud, presents, causes to be presented, or prepares with knowledge or belief that it will be presented to, or by, an insurer or purported insurer or self-insurer, or any agent thereof, any written statement or other physical evidence as part of, or in support of, an application for the issuance of a health insurance policy, or a policy or contract or other authorization that provides or allows coverage for, membership or enrollment in, or other services of a public or private health plan, or a claim for payment, services or other benefit pursuant to such policy, contract or plan, which he knows to:

(a) contain materially false information concerning any material fact thereto; or

(b) conceal, for the purpose of misleading, information concerning any fact material thereto. Such policy or contract or plan or authorization shall include, but not be limited to, those issued or operating pursuant to any public or governmentally-sponsored or supported plan for health care coverage or services or those otherwise issued or operated by entities authorized pursuant to the public health law. For purposes of this subdivision an "application for the issuance of a health insurance policy" shall not include (a) any application for a health insurance policy or contract approved by the superintendent of insurance pursuant to the provisions of sections three thousand two hundred sixteen, four thousand three hundred four, four thousand three hundred twenty-one or four thousand three hundred twenty-two of the insurance law or any other application for a health insurance policy or contract approved by the superintendent of insurance in the individual or direct payment market; and (b) any application for a certificate evidencing coverage under a self-insured plan or under a group contract approved by the superintendent of insurance.

If the insurer is paying the chiropractic group a percentage of the usual and customary fee, then the waiving of co-payment fees on a regular basis and the charging of lower rates to non-insureds, or to patients who pay by cash, may be construed as insurance fraud because these practices may suggest that the chiropractic group’s ususal and customary fee is not being accurately reported to the insurer. When a rate discount is provided, the question arises as to whether the discounted rate is actually the service provider’s usual and customary charge, making the non-discounted rate an inflated rate. Thus, waiving co-payment amounts and charging higher rates to insureds than to non-insureds, or to those who pay by credit card, for the same services may constitute insurance fraud under N.Y. Penal Law § 176.05(2) (McKinney 1999).

The practice by a non-licensee of charging a flat fee as payment for unlimited services over a set period of time constitutes a violation of the New York Insurance Law. N.Y. Ins. Law § 1101(a) (McKinney 2000) defines the terms "insurance contract" and "fortuitous event" as follows:

(1) "Insurance contract" means any agreement or other transaction whereby one party, the "insurer", is obligated to confer 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.

(2) "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 services that the chiropractic group would provide its patients would be dependent upon the happening of a fortuitous event, that being the need for chiropractic care (the amount or type of which could not be predicted), which would be beyond the control of either party. Therefore, the chiropractic group’s offer to provide unlimited chiropractic services for a pre-paid fee constitutes an insurance business. Conducting an insurance business without the required license is a violation of N.Y. Ins. Law § 1102 (McKinney 2000), which states, in relevant part:

No person, firm, association, corporation or joint-stock company shall do an insurance business in this state unless authorized by a license in force pursuant to the provisions of this chapter, or exempted by the provisions of this chapter from such requirement. Any person, firm, association, corporation or joint-stock company which transacts any insurance business in this state while not authorized to do so by a license issued and in force pursuant to this chapter, or exempted by this chapter from the requirement of having such license, shall, in addition to any other penalty provided by law, forfeit to the people of this state the sum of one thousand dollars for the first violation and two thousand five hundred dollars for each subsequent violation.

Thus, a chiropractic group that is not licensed as an insurer, and which charges a flat fee as payment for unlimited services over a set period of time, is in violation of N.Y. Ins. Law §1102 (McKinney 2000).

For further information you may contain Attorney Sally A. Geisel at the New York City Office.