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

George E. Pataki
Governor

Howard Mills
Acting Superintendent

The Office of General Counsel issued the following opinion on April 8, 2005, representing the position of the New York State Insurance Department.

Re: Co-payment and Deductible Waivers

Question Presented:

May a health care provider waive any co-payments and/or deductibles for which a patient is responsible under the provisions of his or her health insurance contract if the patient is indigent?

Conclusion:

Yes, a health care provider may occasionally waive a co-payment or deductible due from an indigent patient. In addition, a decision in the exercise of business judgment, not to pursue the full legal remedies available to collect a debt would not constitute an insurance fraud. However, if the health care provider were to make such waivers a common business practice, the health care provider may be found guilty of insurance fraud in violation of Article 4 of the N.Y. Ins. Law.

Facts:

A not-for-profit organization, which provides alcohol and substance abuse treatment services, has not contracted with any insurance companies. Some of the organization’s clients have private insurance which requires them to pay copayments and/or deductibles. Some of these clients are indigent and can not afford to pay the deductibles and/or co-payments.

Analysis:

We have addressed this issue in previous Opinions of General Counsel. See Opinions of General Counsel Nos. 04-02-25, 03-04-09 and 01-02-20, copies of which are enclosed.

As we have previously stated, a physician who, as a general business practice, waives otherwise applicable co-insurance, co-payments, or deductibles, where such waiver would affect the amount the insurer would pay might be guilty of insurance fraud pursuant to N.Y. Penal Law § 176.05(2) and N.Y. Ins. Law § 403(c).

N.Y. Penal Law § 176.05(2) provides, in relevant part, as follows:

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 . . . (emphasis added).

N.Y. Ins. Law § 403(c) (McKinney 2000) authorizes the Superintendent of Insurance to impose a civil penalty for insurance fraud and provides as follows:

(c) In addition to any criminal liability arising under the provisions of this section, the superintendent shall be empowered to levy a civil penalty not exceeding five thousand dollars and the amount of the claim for each violation upon any person, including those persons and their employees licensed pursuant to this chapter, who is found to have: (i) committed a fraudulent insurance act or otherwise violates the provisions of this section; or (ii) knowingly and with intent to defraud files, makes, or assists, solicits or conspires with another to file or make an application for a premium reduction, pursuant to subsection (a) of section two thousand three hundred thirty-six of this chapter, containing any materially false information or which, for the purpose of misleading, conceals information concerning any fact material thereto.

For example, if an individual were insured under a health insurance policy obligating the insurer to reimburse the insured 80% of the physician’s usual and customary charges and were the physician to inform the insurer that his or her usual and customary charge for a procedure was $100, the insurer would, in anticipation that the physician would require the patient to pay him or her $20, reimburse the insured $80. If however, the physician was to, as a general business practice, waive the $20 co-payment, the physician’s usual and customary charge would not be $100 but would be $80. Under those circumstances, the obligation of the insurer would be $64

Similarly, if the policy required the insured to pay a $1000 deductible before the insurer reimbursed the insured for the physician’s usual and customary charges, and the physician reported to the insurer that his or her usual and customary charge for services was $1500, the insurer would, pay the physician $500 expecting that the physician would require the insured to pay the remaining $1000. By waiving the $1000 deductible, the physician would be charging less for the services than he or she reported to the insurer.

Whether such actions constitute fraud would depend upon the facts of the particular case and the intent of the parties and the physician could be guilty of insurance fraud as that term is defined in N.Y. Penal Law § 176.05. In addition, an insured who submits a claim to his or her insurer knowing that the health care provider has waived a co-insurance payment, co-payment and/or deductible, could also be guilty of insurance fraud.

However, we stated in Opinion of General Counsel No. 03-04-09 that:

[I]f a physician were to occasionally waive a co-insurance, co-payment or deductible as a courtesy to a family member or fellow physician or for an indigent patient, he or she would not be guilty of insurance fraud. In addition, a decision in the exercise of business judgment, not to pursue the full legal remedies available to collect a debt would not constitute an insurance fraud.

If Medicare or Medicaid were involved, then a federal statute, 42 U.S.C.S. 1320a-7b (LEXIS 2005), criminalizes a number of acts involving Federal health care programs. The United States Secretary of Health and Human Services has by regulation, 42 C.F.R. § 1001.952(k) (LEXIS 2005) clarified when waivers do not constitute illegal remuneration.

For further information you may contact Assistant Counsel Brenda M. Gibbs at the Albany Office.