The Office of General Counsel issued the following informal opinion on May 29, 2001, representing the position of the New York State Insurance Department.
Re: Ambulance Subscription Plan
Would the proposed ambulance service subscription plan (the "Plan") be permissible under the New York Insurance Law?
The proposed Plan would violate the New York Insurance Law.
A network of private ambulance service providers ("the network") has proposed offering to the public a subscription plan pursuant to which the participants would pay an annual fee. This fee would be accepted in lieu of the co-payment or deductible under the participants insurance coverage by any network member that provides emergency or medically necessary ambulance transportation to the participant. Participants would be required to verify that they had existing ambulance service coverage. Under the terms of the subscription agreement, participants would not be guaranteed that they would receive ambulance services from any network member.
Under N.Y. Ins. Law § 1101(b)(1)(A) (McKinney 2000), the making as insurer of any insurance contract constitutes the doing of an insurance business in this State. Section 1101(a)(1) and 1101(a)(2) define 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.
In the instant case, the benefits to be provided under the networks program (i.e., ambulance services) would be based upon the happening of a fortuitous event. The need for ambulance transport is presumably beyond the control of either the network or the participant. The Department has in the past opined that a company is not engaged in the business of insurance where it obligates itself to confer a benefit based upon the happening of a fortuitous event if the charge made for the benefit covers the cost of rendition of the services. In effect, such an arrangement amounts to the provision of a discount, and is permissible. However, it cannot be unequivocally stated whether or not the cost of rendition for the program you propose will be covered by the insurance payments in each instance. Every participant will no doubt have different insurance benefits. Because each subscriber will have different insurance coverage, the "subscription charge" in effect amounts to an insurance premium. The "benefit of pecuniary value" under this arrangement is the provision of ambulance services at a reduced rate.
Because the network is not licensed by this Department and is not specifically exempted from the statutory requirement for licensing, the proposed program is not permitted under the New York Insurance Law.
I note further that, as mentioned above, the subscription agreement under the Plan provides that no network member would be contractually obligated to provide a subscriber with ambulance services when requested. Rather, the subscription provides that, in the event a subscriber does receive ambulance services from a network member, the network member will accept the subscribers medical insurance coverage reimbursement as full payment and will waive any co-payment or deductible. The fact that the subscriber is not guaranteed ambulance services by the network member does not alter the above analysis. The lack of a guarantee that the subscriber will actually receive the ambulance service does render the chance of receiving benefits of the Plan more uncertain. However, if the benefits are received, the nature of the operation of the Plan still meets the definition of insurance in that a promised benefit of pecuniary value is conferred in the event of the occurrence of a fortuitous event.
Finally, there also exists the possibility that the network members, whose participation in the Plan essentially amounts to the waiving of co-payments, could be construed as running afoul of N.Y. Penal Law § 176.05 (McKinney 2000). That section provides as follows:
A fraudulent 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, self insurer, or purported insurer, or purported self insurer, or any agent thereof, any written statement as part of, or in support of, an application for the issuance of, or the rating of a commercial insurance policy, or certificate or evidence of self insurance for commercial insurance or commercial self insurance, or a claim for payment or other benefit pursuant to an insurance policy or self insurance program for commercial or personal insurance which he knows to: (i) contain materially false information concerning any fact material thereto; or (ii) conceal, for the purpose of misleading, information concerning any fact material thereto.
The waiving by health care service providers of otherwise properly payable co-payments and deductibles has been viewed by the Department as violative of the above provision.
In light of the above, the Plan would not comply with the New York Insurance Law.
For further information, you may contact Supervising Attorney Michael Campanelli at the New York City Office.