The Office of General Counsel issued the following opinion on March 16, 2004, representing the position of the New York State Insurance Department.
Re: Usual Customary & Reasonable, Prescription Drugs
1. May a pharmacy charge a third party payor, other than a no-fault insurer, its Usual Customary and Reasonable charge (UCR) for a prescription drug?
2. May a pharmacy maintain two separate price lists, one representing its UCR charges and the other the amount it charges no-fault insurers?
3. If a pharmacy maintains a single price list reflecting its UCR charges, may it bill a no-fault insurer an amount that differs from the amount on its price list?
4. If a pharmacy maintains a single price list reflecting its UCR charges, may it bill a no-fault insurer an amount that reflects the amount on its price list?
1. Such actions would not be violative of the New York Insurance Law (McKinney 2000 and 2004 Supplement) or the regulations promulgated thereunder.
2. While maintenance of such lists would not be violative of the New York Insurance Law or the regulations promulgated thereunder, the Insurance Department can express no opinion as to compliance with any other applicable statutes or regulations.
3. While such billing practices would not be violative of the New York Insurance Law or the regulations promulgated thereunder, the Insurance Department can express no opinion as to compliance with any other applicable statutes or regulations.
4. Such a billing practice would be violative of the New York Insurance Law.
No facts are provided.
The use of UCR by insurers is not mandated by any statute or regulation and it was developed by the health insurance industry in an effort to provide a form of coverage that would be attractive to the marketplace in place of specified fee schedules. However, the Department has been mandated by the Legislature to establish standards for the use of UCR. New York Insurance Law 3217(a) (McKinney 2000).
An example of UCR language that is used by an insurer to determine the amount it will pay for prescription drugs is:
Usual Customary and Reasonable (UCR) Charge is the amount charged or the amount Health Plan determines to be the reasonable charge, whichever is less, for a particular health service in the geographical area in which it is performed.
Most insurers, except those that have sufficient claims data to be actuarially credible, utilize third party services, which compile billing practices of a number of health professionals, in order to generate the UCR profile of a region. Accordingly, the amount billed by a health care professional to a third party payor for a particular procedure, service or product may affect that payors calculation of UCR.
New York Penal Law § 176.05(2) (McKinney 1999 and 2004 Supplement) defines insurance fraud:
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 any agent thereof, any written statement or other physical evidence as part of, or in support of . . . 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. . . .
A health care professional who submits a claim to an insurer in an amount that does not represent the professionals usual charge, in an attempt to either collect an amount that does not represent the professionals usual charge or to improperly influence the calculation of UCR would be guilty of insurance fraud.
No-fault benefits encompass, among others, New York Insurance Law § 5102(a)(1) (McKinney 2000):
All necessary expenses incurred for: (i) medical, hospital . . . surgical, nursing, dental, ambulance, x-ray, prescription drug . . . all without limitation as to time, provided that within one year after the date of the accident causing the injury it is ascertainable that further expenses may be incurred as a result of the injury. For the purpose of determining basic economic loss, the expenses incurred under this paragraph shall be in accordance with the limitations of section five thousand one hundred eight of this article.
New York Insurance Law § 5108(c) (McKinney 2000) provides:
No provider of health services specified in paragraph one of subsection (a) of section five thousand one hundred two of this article may demand or request any payment in addition to the charges authorized pursuant to this section. Every insurer shall report to the commissioner of health any patterns of overcharging, excessive treatment or other improper actions by a health provider within thirty days after such insurer has knowledge of such pattern.
In accordance with the direction of New York Insurance Law § 5108(b), the Department has established a maximum fee schedule to be followed by pharmacists in making billings to no-fault insurers, N.Y. Comp. Codes R & Regs. tit 11, Appendix 17-C Part E (2002):
Drugs, medical equipment and supplies. (a) (1) The maximum permissible charge for drugs, medical equipment and supplies provided by a licensed pharmacist is: (i) for drugs requiring a doctor's prescription, the actual cost of the drug to the druggist (not to exceed the cost shown in the American Druggist Blue Book or Drug Topic Red Book) plus a dispensing fee of $ 4.85, except that for a compounded prescription a $ 1.95 compounding fee shall be added to the dispensing fee; .. . . (ii) for medicines not requiring a doctor's prescription, the prevailing charge; (iii) for medical equipment and supplies, 150 percent of the actual cost of the equipment or supplies to the pharmacist.
Where a health care provider is required by statute, such as for no-fault, workers compensation, Medicare, or Medicaid, to bill at an amount less than the UCR and does so, it is not in violation of the New York Insurance Law, nor is such provider guilty of insurance fraud.
It is assumed that the referred to price list is the list required to be maintained by the pharmacy in accordance with New York Education Law § 6826 (McKinney 2001 and 2004 Supplement) and N.Y. Comp. Codes R. & Regs. tit. 8, § 63.6(b)(9) (2000). There is no prohibition in the New York Insurance Law preventing a pharmacy from opting to either maintain two price lists, one of UCR and the other for statutorily mandated charges, or, in the alternative, bill the no-fault insurer an amount reflecting the mandated charge, even if such bill would be for an amount less than the price list. The Department, however, can express no opinion as to the requirements imposed on the pharmacist by New York Education Law Article 137 (McKinney 2001 and 2004 Supplement).
If, however, the pharmacist billed the no-fault insurer from a single price list, reflecting UCR, in anticipation that the insurer would reduce the amount of the claim to the amount allowed pursuant to N.Y. Comp. Codes R. & Regs. tit. 11, Appendix 17-C Part E, the pharmacist would be in violation of New York Insurance Law § 5108(c).
For further information you may contact Principal Attorney Alan Rachlin at the New York City Office.