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

David A. Paterson
Governor

Eric R. Dinallo
Superintendent

The Office of General Counsel issued the following opinion on March 27, 2008 representing the position of the New York State Insurance Department.

Re: Health Insurance, Balance Billing

Questions Presented:

1. If a health care provider treats a patient who is insured by an insurer, and the health care provider is not in the insurer’s network (that is, the physician is a “non-participating provider”), may the health care provider charge the patient the difference between the provider’s charges and the amount paid by the insurer?

2. Would the answer be different if the patient were covered by a health maintenance organization (“HMO”)?

Conclusions:

1. Yes, under most circumstances, a non-participating provider may charge the patient the difference between the provider’s own charges and those covered by the patient’s insurer.

2. No, where the patient is covered by an HMO, the answer would not change.

Facts:

The inquirer asks about a situation where a health care provider is providing care for a chronic illness, and the patient is insured by a non-HMO. The health care provider is not a participating provider in that insurer’s network.

The inquirer reports that the insurer accepts claims submitted by the health care provider, and pays the health care provider a percentage of the insurer’s usual and customary or reasonable charges (“UCR”) for procedures that are performed. For the purposes of this inquiry, it is assumed that none of the claims implicates the New York Workers' Compensation Law or Article 51 of the New York Insurance Law, commonly referred to as the “no-fault” law.

In the example, the health care provider usually charges $100 for a procedure. The insurer’s UCR for that procedure is $90. The insurer sends the health care provider 80% of $90, or $72. The health care provider desires to charge the patient $28, which represents the difference between the provider’s usual charge of $100 and the $72 payment by the insurer. The inquiry is about the lawfulness of this arrangement.

Analysis:

As is noted, the Insurance Department’s Office of General Counsel previously addressed this issue in an opinion dated April 4, 2003. The passage of time has not led the Insurance Department to reach a conclusion different from that stated in that opinion.

In the hypothetical, the difference between the health care provider’s charge and the insurer’s UCR is only $10. In the April 4, 2003 opinion, the Department concluded that the health care provider generally has an obligation to collect that difference1. However, that submission of a claim with an inflated figure might constitute insurance fraud. See Opinion of the Office of General Counsel dated June 7, 2007.

The inquirer also asks whether the Department’s conclusion would differ where the insurer is an HMO. Article 48 of the Insurance Law regulates “managed care health insurance contracts,” but not HMO contracts. That section is not applicable to HMOs, see Insurance Law § 1109; HMOs are governed by Article 44 of the Public Health Law. Nevertheless, Insurance Law § 4804, a provision the inquirer cites that is styled “Access to specialty care,” states in pertinent part:

(a) If an insurer offering a managed care product determines that it does not have a health care provider in the in-network benefits portion of its network with appropriate training and experience to meet the particular health care needs of an insured, the insurer shall make a referral to an appropriate provider, pursuant to a treatment plan approved by the insurer in consultation with the primary care provider, the non-participating provider and the insured or the insured's designee, at no additional cost to the insured beyond what the insured would otherwise pay for services received within the network.

Of course, Insurance Law § 4804(a) has no force when a patient, for reasons other than unavailability of a network specialist, chooses a non-participating health care provider.

The substantive requirements of subscriber contracts of HMOs are governed almost exclusively by the Public Health Law. However, Public Health Law § 4406 addresses Insurance Department involvement and addresses out of network services, It provides, in pertinent part as follows:

(1) The contract between a health maintenance organization and an enrollee shall be subject to regulation by the superintendent [of insurance] as if it were a health insurance subscriber contract, and shall include, but not be limited to, all mandated benefits required by article forty-three of the insurance law. . . .

2 (a) Upon approval of the commissioner [of health], an organization may implement an out-of-plan benefits system that allows enrollees to use providers not participating in the plan pursuant to a contract, employment or other association.. . .

. . .

(e) The indemnification of enrollees of the services of a non-participating provider may be subject to deductibles, co-payments and/or coinsurance approved by the superintendent.

Accordingly, because Insurance Law § 4804(a) is not applicable by its terms to HMOs, and since that statute is not concerned with most instances where non-participating health care providers are utilized, the same rule concerning collection of deductibles and co-payments would apply to both HMO and non-HMO insurers.

For further information you may contact Principal Attorney Alan Rachlin at the New York City office.

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1  Provided that the insurer is not misled, a health care provider may waive the co-payment on a case-by-case basis under special circumstances, such as poverty of the patient.